ISLAMABAD: Pakistan’s indigenous natural gas production declined by 8 percent in FY25, while consumption of imported Regasified Liquefied Natural Gas (RLNG) in the power sector plunged by 24 percent as expanding distributed solar generation displaced expensive fuel-based electricity, according to Renewables First’s Pakistan Energy Market Review.
The report highlights how increasing adoption of rooftop and other distributed solar systems is reshaping Pakistan’s energy consumption patterns, reducing dependence on imported fossil fuels and generating substantial foreign exchange savings, while exposing structural weaknesses in the country’s energy statistics.
Local natural gas production declined by 8 percent year-on-year in FY25 after a brief period of stability during FY23-FY24, continuing the downward trajectory of indigenous supplies. The decline reflects depletion of mature gas fields and limited exploration activity, which have constrained replacement supplies.
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Excess RLNG availability during FY25 also resulted in curtailment of domestic gas production, further reducing indigenous output.
LNG imports declined by 4 percent year-on-year to 8.7 million tonnes of oil equivalent (Mtoe) in FY25, slightly below the five-year average of 9 Mtoe, as rising solar adoption reduced RLNG-fired power generation.
Lower power sector offtake resulted in surplus contracted LNG volumes, leading to cargo deferrals and diversions to international markets.
Power sector natural gas demand declined by 17 percent year-on-year as distributed solar reduced grid electricity demand and RLNG-fired power plants remained lower on the economic merit order, limiting their utilisation.
RLNG consumption in the power sector contracted by 24 percent year-on-year in FY25, reflecting continued growth in distributed solar among residential and industrial consumers.
The persistent shortage of domestic gas and the government’s objective of diverting surplus LNG towards industries increased RLNG consumption in other sectors by 54 percent year-on-year in FY25.
RLNG held in gas pipelines increased by 23 percent year-on-year, raising line-pack pressure, curtailing indigenous gas production and contributing to excess cargo diversion.
Natural gas consumption in the domestic sector declined by 10 percent year-on-year in FY25, reaching its lowest level during the review period amid government interventions, curtailed supplies and higher tariffs.
Industrial gas consumption, however, increased by 3.6 percent year-on-year, supported by improved industrial activity. Export-oriented industries and cement production were the principal drivers, although annual demand remained the second-highest since FY20.
According to Renewables First, distributed solar has emerged as a missing component in Pakistan’s official energy statistics, resulting in an incomplete assessment of the country’s energy supply, consumption and economic transformation.
Official figures show primary energy supply increased by only 1.6 percent in FY25, while reported energy consumption grew by 8 percent. However, these statistics do not account for energy generated through rooftop and other distributed solar systems.
By incorporating distributed solar into national energy statistics, the analysis presents a more comprehensive picture of Pakistan’s energy landscape, showing that energy supply and consumption have both expanded steadily alongside economic activity.
The report estimates that distributed solar has helped Pakistan avoid approximately $15 billion in fossil fuel imports by FY26, substantially reducing pressure on foreign exchange reserves.
Imported fossil fuels accounted for approximately 34 Mtoe, or 41 percent of Pakistan’s primary energy supply in FY25, compared with 37 percent in FY24. This growing dependence is exposing the economy to international price volatility and supply disruptions.
Between FY20 and FY26, a substantial portion of Pakistan’s energy import expenditure went towards fuels that are less efficient, both economically and physically, than renewable technologies available for substitution.
Solar panels and inverters are increasingly replacing imported RLNG and coal used for power generation, converting a one-time equipment import into long-term savings through reduced fuel requirements.
The report estimates that solar capacity and inverters imported at a cost of $8.9 billion up to FY26 have helped Pakistan avoid nearly $14.7 billion in fossil fuel imports.
A further investment of $4.57 billion in future inverter replacements is projected to avoid an additional $109 billion in fossil fuel imports between FY27 and FY50.
This brings cumulative savings to approximately $124 billion over FY17-FY50, equivalent to $9.23 in avoided fossil fuel imports for every dollar invested, even without assuming inflation or increases in RLNG and coal import prices.
The report estimates that every dollar Pakistan spends on importing solar panels and inverters saves approximately nine dollars in fossil fuel imports over the equipment’s lifetime. Solar panels and inverters displace imported RLNG and coal that would otherwise be consumed for power generation, transforming a one-time equipment import into sustained reductions in the country’s fuel import bill.
Oil supplies increased by 15 percent year-on-year in FY25, accounting for 24 percent of total primary energy supply, largely driven by transportation requirements.
Domestic crude oil production declined by 12 percent year-on-year, despite a 10.5 percent increase in annual crude supplies. The persistent decline reflects depletion of mature fields, weak reserve replacement and limited upstream investment.
Crude oil imports increased by 20 percent year-on-year in FY25 to meet refinery requirements as domestic production declined. Imported crude now accounts for 77 percent of local refinery requirements, making refinery operations increasingly dependent on external supplies.
Petroleum consumption in the power sector plunged by 77 percent year-on-year in FY25, reflecting the continued transition away from expensive oil-fired generation through plant retirements and greater reliance on distributed solar.
Meanwhile, industrial oil demand increased by 3.2 percent year-on-year to 1.14 Mtoe in FY25, reflecting stronger manufacturing activity and higher industrial fuel requirements.
Indigenous coal production declined by 3 percent year-on-year in FY25, marking its first annual reduction since FY15. Consequently, its share of national coal supply fell by six percentage points.
The decline reflects operational constraints and lower output from mature coalfields, slowing the growth of domestic coal supplies.
Coal imports increased from 3.6 Mtoe in FY24 to 4.6 Mtoe in FY25 to meet rising demand from power generation, brick kilns and other industrial consumers.
However, expanding Thar lignite production and government plans to shift existing coal-fired power plants towards domestic coal could limit future import growth, keeping volumes below previous peaks.
Coal consumption in the power sector remained unchanged overall, although it declined by 9 percent year-on-year in FY25, reflecting changes in plant dispatch and utilisation.
Growing reliance on domestic lignite for power generation is expected to sustain the fuel’s role in Pakistan’s energy mix in coming years.
The report identifies the domestic sector as the leading segment in distributed solar adoption, with an electrification rate of 48 percent. Nearly half of its annual energy demand continues to rely on natural gas, indicating considerable scope for further electrification.
Industrial electrification increased from 20 percent to 25 percent between FY23 and FY25, driven by growing solar adoption among industrial consumers.
Agriculture’s reliance on grid electricity declined for the third consecutive year as rising electricity tariffs accelerated solar electrification, which increased by 80 percent year-on-year in FY25.
However, official statistics classify agricultural high-speed diesel (HSD) consumption under transportation, leaving diesel displacement from solarised tubewells unaccounted for in reported electrification rates.
The transportation sector remains the largest consumer of oil products and the least electrified segment of the economy, highlighting the need for accelerated electrification to reduce dependence on imported petroleum products.
Copyright Business Recorder, 2026
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