Page 85 - CMA Journal (Mar-Apr 2026)

S ECT O R I NSIG HT S

Pakistan Energy Imports, LNG System LNG trade. Re ned fuel markets also tightened due to
and Emerging Risks lower re nery output and export restrictions in the Asia
Paci c region. This reduced supply availability and forced
(1) Pakistan Fuel Import Dependence: Pakistan’s energy demand adjustments of lower inventories and
system depends heavily on imported fossil fuels including precautionary buying.
crude oil, re ned petroleum products, and LNG. (5) Macro Stress: Pakistan faces combined pressure
Hydrocarbons remain the main energy source, while coal, from LNG and re ned fuel imports. This creates
hydro, nuclear, and renewables play a smaller role. This dependence on LNG for power and re ned fuels for
dependence is due to long term supply and capacity gaps. transport. During global disruptions, this increases
Domestic gas production has declined since its peak around import costs, in ation, and pressure on foreign exchange
2012. Local re ning capacity is not enough to meet demand. reserves. Even before recent shocks, LNG had a structural
Currency depreciation further raises import costs and scal imbalance due to long term over contracting and falling
pressure. The system is also a ected by circular debt, which demand. By early 2026, excess supply was projected at
delays payments and creates nancial stress. Oil imports up to 177 cargoes over the next decade under existing
mainly meet transport fuel demand. LNG has been used as a contracts. This shows a clear mismatch between
bridging fuel since 2015 for power generation and industry. contracted supply and actual demand. To manage
LNG infrastructure has expanded through terminals at Port surplus LNG, Pakistan has used diversion under net
Qasim and private sector participation. However, costs proceeds di erential arrangements, reduced domestic
remain high due to spot purchases and long-term contracts gas production, and increased supply to subsidized
linked to global prices. Underused terminals and pipelines households. However, these steps have increased
also create e ciency losses.
circular debt, strained infrastructure, and created
(2) LNG Contracts: LNG imports mainly come from Qatar ine ciencies due to the gap between imported LNG
and the United Arab Emirates under long term take or prices and subsidized domestic tari s.
pay contracts. These ensure supply but require payment
even when demand is low. After 2021, demand fell Future Energy Import Outlook
sharply. Between 2021 and 2025, LNG use dropped from Pakistan is shifting toward a cleaner and more
8.2 million tonnes to 6.1 million tonnes due to solar decentralized energy system. The target is about 60
growth, industrial slowdown, and high prices. This percent clean electricity by 2030 to reduce import
created surplus supply by 2024 and 2025. Limited dependence, lower costs, and improve economic
storage and rigid contracts increased system stress. The stability.
result was excess cargoes, pipeline pressure, and
reduced domestic gas output to balance supply and Solar energy is expanding rapidly. Rooftop solar is
demand. Seasonal gaps between summer surplus and expected to meet around 20 percent of electricity
winter shortages further added to ine ciency. demand by 2026. Between 2017 and 2025, about 50 GW
of solar panels were imported, close to the size of the
(3) LNG Demand in Power Sector: About 70 percent of national grid.
LNG is used in power generation. Demand fell as
gas-based electricity became more expensive than However, structural issues remain. Circular debt reached
alternatives. Major plants such as Bhikki, Balloki, Haveli about Rs. 1.889 trillion by 2026. Transmission and
Bahadur Shah, and Trimmu operated at lower capacity. distribution constraints continue to limit e ciency and
Industrial demand also declined due to higher tari s, require major upgrades.
weaker exports, and reduced competitiveness. Rapid Oil and LNG imports will still remain important for power
solar growth further reduced grid dependence. By 2025, generation, industry, and seasonal balancing. Declining
distributed solar capacity reached around 34 gigawatts, domestic gas production further supports continued
lowering demand for grid electricity. These changes have LNG reliance.
permanently reduced LNG demand in the power sector Future policy focuses on improving e ciency, demand
and increased variability in energy use. management, and increasing renewable and nuclear
(4) External Risks: Pakistan remains highly exposed to energy share. Fossil fuel imports are expected to be
global shocks due to import dependence, limited managed more exibly rather than expanded.
storage, and concentrated supply sources. Energy Overall, Pakistan’s energy system is moving toward a
disruptions increased during the US Israel induced war mixed structure where renewables grow quickly while
on the Islamic Republic of Iran. The con ict a ected LNG fossil fuels continue to play a balancing role during the
supply chains, damaged regional energy infrastructure, transition.
and disrupted shipping through the Strait of Hormuz.
This route handles more than 20 percent of global oil and

ICMA’s Chartered Management Accountant, Mar-Apr 2026 83