Pakistan to cut gas supply to Captive Power Plants as IMF deadline looms

ISLAMABAD: Pakistan’s Petroleum Division is expected to issue notices this week to Captive Power Plants (CPPs) to cut gas supplies as part of the $7 billion International Monetary Fund (IMF) loan programme.

This action, a key condition of the IMF agreement, is expected to be completed by January 2025.

A senior Energy Ministry official warned that failure to meet the deadline would risk the collapse of the loan programme. However, the move could have severe economic consequences, potentially resulting in a $13 billion export revenue loss.

The official explained that disconnecting CPPs could destabilise electricity supplies and harm the export sector by eroding global buyers’ confidence in Pakistani manufacturers and leading to reduced foreign exchange, job losses, and lower revenue for the Federal Board of Revenue.

During the IMF mission’s visit in November, the Petroleum Division highlighted the potential impact of the gas cuts, warning that gas companies could lose Rs392-400 billion in revenue.

Currently, CPPs are supplied with blended gas at Rs3,400 per mmbtu in the north and Rs3,200 in the south, with the export sector consuming 350 mmcfd of gas daily.

The situation has already caused a significant reduction in overall gas demand, forcing Pakistan to request a delay in five liquefied natural gas (LNG) shipments from Qatar, pushing deliveries from 2025 to 2026.

Despite the concerns, the IMF has stood firm, although it expressed willingness to discuss the issue. The Fund suggested that shifting industry to grid electricity could increase grid utilisation and help manage capacity payments.

However, Pakistan’s industrial sector argues that the national grid’s unstable power supply, marked by outages and fluctuations, poses risks to manufacturing processes.

Industries fear that their existing investments in gas-based infrastructure could become stranded assets if they are forced to transition to grid electricity.

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