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ISLAMABAD: The government wants to reduce its exposure and liabilities, if not responsibilities, from the energy sector. Up to now, the government has been heavily involved giving sovereign guarantees, underwriting power purchase agreements (PPAs), buying at higher prices all what producers could offer and practically selling at a loss. The result is circular debt, unaffordable high prices hurting people, industries and exports. The Petroleum Division has announced its intention, if not a declared or written policy, that it would welcome investments in the liquefied natural gas (LNG) sector with least government involvement. It would not give guarantees and would not stop or delay investment proposals. If investors think there is a market, they should go ahead and import or produce and sell to willing customers. If you are able to sell, well and good, and if not, our sympathies only – no financial support and no guarantees. This appears to be too good to be true. This may not be a fairytale. After all, the entire oil sector, refineries and oil marketing companies (OMCs) are working without guarantees. There is a policy that oil will be sold at international prices plus the local selling costs. The government adds some levy plus GST. This is enough to attract investments in this sector. The existence of sufficient demand and market are possibly the only yardstick for making investment decisions.
Unfortunately, there is no international price in case of electricity and gas. There are too many variants. Where simplified parameters have been set, competition has come almost everywhere. Look at solar and wind. LNG and extension of gas pipeline networks have made it possible that one may start thinking about markets (and not government) start working even in developing countries like Pakistan. Markets and prices are converging. There used to be wide price difference among regional markets, which is no more. Thus, the government has made it open, install as many terminals as you wish, if you think, you can sell. And investors are coming.
