Pakistan is set to remove a government cap on natural gas prices that has deterred potential investment
Pakistan is set to remove a government cap on natural gas prices that has deterred potential investment, allowing them to rise slowly in line with global oil prices, government and industry officials said on Thursday.
The current pricing policy, set in 2002, caps the price of gas from more than 90 percent of the country’s fields at $36 a barrel crude oil equivalent, nearly half world prices.
The government is expected to approve the new policy draft by June, and would only apply to new government-backed gas purchase deals but not to existing long-term agreements. The ministry said Pakistan needed huge investment to boost natural gas output, which is about 3.8 billion cubic feet a day and meets only half of total energy demand.
Industry officials say ending the current policy, common in much of Asia as governments seek to protect consumers from higher electricity prices, could remove a major hurdle in attracting foreign oil and gas investment. “(This) is no doubt a big step,” said Mohammad Sohail, director at JS Global Capital Ltd. “The gas supply may soon become insufficient due to increasing demand and depletion of present reserves,” the ministry said. “This, in turn, will force Pakistan to soon begin importing large volumes of gas at international prices to feed the domestic market.”