Pakistan is stuck in the quagmire of circular debt since the past more than a decade. This factor has proven to be a major retarder of the performance of the power sector.As per a recent media report, the circulardebt of the petroleum supply chain has also growninto a monster accumulating to1.6 Trillion PKR. It appears that managing the spiral would continue to be a challenge for the economy until it is interrupted by some radical measures. The situation is after all getting more and more fragile and unsustainable. The economy appears to have exhausted all the margins of tolerance in this regard; therefore, the circular debt resulting into at least partial and temporary breakdowns has started appearing as a real eventuality. The situation of course necessitates a lot of out of the box thinking to reverse this trend.
This reversal can only be achieved by giving economic strength to the institutions i.e. they genuinely increase their revenues and diversifytheir revenue streams whenever possible. There is nothing novel about it and it is a welltrodden path. If we go through the website of any major energy giants like Shell, BP, Exxonmobiletc we find well established alternate streams of Wind and solar based power, biofuels, power generation from recycled waste and even hydrogen. All signs are there that they would smoothly transition to alternate streams i.e. when the oil and gas have been replaced by these fuels.
Even in Pakistan UEP has already established a wind based energy house. If we wantto learn further about the advantages of diversification and synergies, we should just go through the history of Engro in the past around two decades. Thus, operational agility (an essential element of this proposal) and diversification serve as a unique combination of versatility and maneuverability to absorb shocks of the economy and still continue to grow. In my view SNGPL is an excellent candidate for this transformation. Indigenous gas reserves are fast diminishing; therefore, SNGPL needs to gradually steer itself towards diversification such as :a)It may start aggressively looking for operational and commercial synergies in various import projects like RLNG and TAPI. Despite of its financial challenges; its immense technical capacity and experience can enable it to leverage them for it to become an indispensable partner in all such undertakings.b) Transmission through pipelines may be undertaken only when it is economical. In Pakistan piped gas covers hardly 25 to 30% of the population. Therefore, it shouldtake full advantage of the concept of “virtual pipelines” wherever possible. This provides a unique opportunity for SNGPL to develop alignments with the new players of this expertise entering,or considering to enter, the Pakistani market.c)Based on its experience and capacity of executing large-scale cross-country projects in challenging environments;it can start exploring opportunities in international market for organic/ in-organic growth along the said course. d)SNGPL is successfully operating one of the world’s largest gas pipelines networks. It should seriously consider about contracting out its services to other Operators outside Pakistan for similar scopes (O&M). e) It can start developing synergies with local and foreign private parties active in the LNG supply chain and consider adopting long-term commercial models of those synergies (tolling mechanism etc). LNG has already developed into a major revenue stream in the country and its role is expected to grow further in the coming days.f)It has extensive experience of designing, engineering and laying such a vast network of pipelines in some of the most difficult terrains. Therefore, it may develop its design house to the required scale and provide engineering services at international level. g)In order to ensure effective management of the supply chain of gas and LNG, it may consider participating in a project of undergroundgas storage with a strategic foreign partner; preferably already having presence in Pakistan and thereafter extending that relationship further. There is a strong probability that leveraging its existing vast footprint and roots in the system, it can develop successful mutually beneficial commercial models in this regard despite of its financial challenges.
In addition to the above: a) it needs to maintain proactive coordination with each of its suppliers with respect to their exploration and development plans and projections to ensure timely availability of the transmission network and minimal time lag between reserves availability and their monetization. b)Post-LNG system dynamics need to be critically observed and analyzed so that any bottlenecks in the transmission system may not retard effective load switchovers and optimal injection from the relevant gas fields.
As to the circular debt; though as a onetime solution allocation of corresponding equity in other profitable ventures may work; however, until the basic factors contributing towards the debt are not addressed, it would reappear again. As to the enormous UFGlosses; different strategies may need to be adopted on regional/ area-wise basis. The model of KESC may deliver in combination with mobilization of community elders and deployment of monitoring systemsin the “high priority” areas (Fiber Optic Method which is based on Real Time Transient monitoring, Acoustic Sensors, and Drone based night vision cameras and pressure / mass flow sensors etc.)
In a nutshell, the energy fabric of the country has gotten way more complex (LNG, Coal, Alternate fuels, local gas and its changing dynamics, Hydro-power etc)since the past few years and it would continue to get thicker. In my view, the given challenges demand that SNGPL responds to them by transcending out of its conventional operating ambit along above lines. This would not only enable them to retain their current pivotal role in the energy supply chain of the country; but, also to lead the oncoming transformation. Having dealt with the organization for years and observed their professionaldecision making, flexibility and confidence which come only with maturity and competence, I have no doubts that they are fully equipped with the required capacity to rise up to the above challenge.
