Energy Market Structure: Oil & Gas
Oil and gas play a prominent role in the energy matrix of Pakistan. In FY2019, oil and gas account for 61 per cent of final energy supplies and 63 per cent of final energy consumed (Chart 1 and Chart 2). With limited oil resources and declining gas reserves, dependence on imports is increasing.
The supply chain of both petroleum and gas consists of several activities connected with the flow of goods and services from the raw material stage till the final product reaches the consumer. It involves the interactions of independent companies; various structures are typically involved in the supply chain (Figure 1). An important variable in the constitution of the chain is the financial as well as contractual obligations of these companies and of course the responsibilities of the regulator to monitor those obligations. The problem at any point may have its impact at the final consumer end. This chapter provides an overview of the oil and gas market structure.
Fig. 1. OIL and GAS Supply Chain
Chart 1. % share in Energy Supplies (FY2019)
Chart 2. % share in Energy Consumed (FY2019)
Source: Pakistan Energy Yearbook, 2020
OIL MARKET STRUCTURE AND SUPPLY CHAIN
Until 1999, the government had tight control over the petroleum sector in Pakistan. All the decisions were made solely by the government and were often based on political as opposed to economic considerations. Since 2000, the government has initiated an ambitious pro-market reform program in the sector.
As a developing country, Pakistan’s energy requirements are growing gradually over time, from 7 million TOE in FY1972 to 55 million TOE in FY2019. Over the years, the country has seen a change in its energy mix from the dominance of oil in the 1990s to the dominance of gas until FY2015. With the depletion of natural gas resources, the trend again upturned in FY2016, and oil consumption exceeded gas consumption (Chart 3).
Due to the massive domestic demand for oil, a large quantity of crude oil is imported every year. Demand for refined petroleum products greatly exceeds domestic oil refining capacity, so nearly half of the Pakistani imports are refined products.
