Back in Jan 2017 when the Pakistan government was signing the 1.3 metric tonne annual supply of RLNG at prices linked to Brent oil, I had highlighted the fact that the deal was unsustainable and the net result would be the high increase in local gas prices to bring it at par with RLNG.

This is what we are seeing now. Since Brent fuel prices have gone up the RLNG price for Pakistan has also gone up and industries like Fertilizer, Cement and CNG are refusing to use RLNG.

Therefore, the government supplies to RLNG to domestic and industrial users. This results in losses to distribution companies. In addition, to cover these losses the Government, price hike is imminent.

The only solution to this problem would be to renegotiate the RLNG supply deal, make it fixed price for 15 years so local industries can benefit. While Pakistan should increase local production of natural gas through exploration and extraction. In the short term, it might be easier and less expensive to subsidize RLNG for the few industries rather than increase natural gas rates for everyone.

This might even incentivize international companies to setup local industries to take benefit from fixed gas and low labor rates. While Reducing RLNG rate and fixing it for 15 years will help, increase Fertilizer and Cement production and exports.


Peshawar, April 17.