Pakistan's gas sector is experiencing a deep structural collapse that goes far beyond a simple supply shortage, according to an analysis published in Karachi's Business Recorder. The crisis is simultaneously damaging industrial competitiveness, discouraging fresh exploration investment, deepening dependence on costly liquefied natural gas (LNG) imports, and eroding the country's long-term energy security.

The Root of the Crisis

Analysts and the Business Recorder article argue that policymakers have consistently misdiagnosed the problem as a supply shortage, when the fundamental issue is a broken market structure. Pakistan now confronts declining indigenous gas production, unaffordable re-gasified LNG (RLNG) import costs, shrinking industrial throughput, and severe financial stress cascading across the entire energy chain — yet the institutional framework governing the sector has barely evolved.

The most consequential symptom is the collapse in throughput. Industrial consumers have been steadily abandoning pipeline gas as tariffs have become both unaffordable and unpredictable. Businesses are pivoting to solar, coal, biomass, furnace oil, and captive self-generation, as pipeline gas is no longer considered commercially reliable.

How Policy Made Things Worse

The demand destruction has been accelerated by what the Business Recorder analysis describes as misguided policy. A wrongly calculated levy imposed on captive power plants effectively priced large segments of industry out of the gas system entirely. Rather than preserving industrial throughput and export competitiveness, the policy pushed industry aggressively away from gas consumption.

The outcome was predictable: industrial off-take fell, fuel-switching accelerated, and alternative energy investments displaced gas demand. This has inflicted lasting damage on the economics of the pipeline network itself.

The Utility Death Spiral

Pakistan's gas infrastructure carries enormous fixed costs — pipelines, compressor stations, maintenance, debt servicing, and staffing — that do not shrink simply because fewer gas molecules move through the network. Instead, these fixed costs are distributed across a steadily shrinking volume base.

The result is what economists describe as a classic 'utility death spiral': lower throughput forces higher tariffs, higher tariffs suppress demand further, and falling demand pushes tariffs higher still. The Sui companies — Pakistan's primary gas distribution utilities — continue attempting to recover infrastructure costs, unaccounted-for gas (UFG) losses, financing charges, RLNG obligations, and historical shortfalls from an increasingly stressed and shrinking customer base.

Consumers are caught in an absurd bind: service quality weakens, supply reliability becomes uncertain, industrial competitiveness deteriorates — yet bills keep rising.

LNG Diversion Deepens the Crisis

The diversion of imported LNG away from industry toward the domestic residential sector has compounded the financial damage. Pakistan originally imported LNG primarily to support industrial growth, efficient power generation, and broader economic expansion. Instead, according to the analysis, increasingly large LNG volumes are being redirected toward low-paying, heavily subsidised domestic consumption. The financial consequences for the sector's viability are described as enormous.

What Comes Next

Without structural reform — including rationalising the tariff framework, reversing the captive power levy, and redirecting LNG toward higher-value industrial use — analysts warn the death spiral will deepen. Exploration investment will remain deterred, industrial competitiveness will continue to erode, and Pakistan's energy import bill will grow heavier. The sector's trajectory, as things stand, points toward further contraction rather than recovery.