Is solar the answer to Pakistan’s perennial power woes?

Pakistan’s energy security stands at a critical juncture, as the nation grapples with a decades-long energy crisis fuelled by systemic sector challenges, governmental indecision, and rampant corruption. Yet, amidst this deepening quagmire, significant shifts are underway that could finally offer a path to stability.

The country’s state-owned oil and gas company, Oil & Gas Development Co. Ltd. (OGDCL), announced last month that it had struck a new oil and gas reservoir at its Faakir-1 onshore wildcat well. The well is part of the Bitrisim exploration licence in Pakistan’s Sindh province, a major gas producing region.

The well was drilled at a depth of 4,185 metres and tested at 6.4 million cubic feet of gas per day (MMcf/d). OGDCL labelled the discovery as a “significant breakthrough” and a major step forward in tapping the potential of the Bitrisim block. However, international standards would indicate otherwise. A 6.4 MMcf/d find is considered relatively small and could do little to alleviate both Pakistan’s gas supply deficit and its over-reliance on imported LNG to drive its power sector.

Kesher Sumeet, Senior LNG Analyst at Energy Aspects Singapore, told Gas Outlook that Pakistan needs around 6.8-7.5 million tons per annum (mtpa) of domestic gas to offset all its LNG imports. “The latest OGDCL discovery is too little to make any significant impact on minimising Pakistan’s LNG imports. 6.4 MMcf/d is equivalent to 0.04 mtpa, which is just a drop in the bucket,” he said.

Pakistan, home to some 240 million people, relied on fossil fuels for 53% of its electricity production in 2024, according to Ember data. The country’s largest source of clean electricity is hydro at 19% of its power mix. Its share of wind and solar is at 13%, but below the global average of 15%. However, solar power made up <1% of the country’s energy mix last year. Pakistan has set a goal that renewable energy make up 58% of its electricity production by 2030. That’s slightly below the global share of 60% renewable electricity set out in the International Energy Agency’s Net Zero Emissions scenario.

Exacerbating these challenges, Pakistan has grappled with significant gas supply issues for years, including declining domestic production, high LNG import costs, and increasing demand, a recent Wood Mackenzie report said. The report projected a 10% year-on-year decline in domestic gas production over the next decade without new discoveries. The Faakir-1 discovery, announced a month after the Wood Mackenzie report, does little to alleviate the reported shortfall and necessitates increased reliance on imported LNG.

Moreover, the cost of LNG, especially spot cargoes, over the past few years, added to Pakistan’s energy sector woes, including fossil fuels import reliance and financial shortfalls. Paying for expensive imported LNG added to the country’s debt level which as of mid-April 2024 amounted to US$131 billion, 75% of its annual GDP. Around 40% was denominated in foreign currencies and owed to external creditors. The country now faces what Pakistan Today called “mounting repayment obligations, including a net outflow of US$30.6 billion in foreign currency over the coming months.” Total domestic debt and government liabilities soared by 18.81% year-on-year in February 2025.

Pakistan has participated in at least 24 International Monetary Fund (IMF) programmes since 1958 to help it deal with both its energy and economic problems. But critics argue that IMF policies can complicate matters, as they often impose strict conditions to secure these loans. Pakistan has also received financial assistance from several other countries, including Saudi Arabia, China and the UAE.

Energy insecurity

These financial strains exacerbate a deeper issue: a fundamental energy insecurity that Pakistan’s LNG quandary starkly illustrates. The country’s LNG dilemma can also serve as a warning for other developing countries that are considering increasing LNG imports as part of their respective energy mixes.

A Bloomberg report in December 2023 said that Pakistan, one of the world’s poorest countries, thought it had secured LNG deals to help fuel its economy, but LNG suppliers thought otherwise. The report details how several powerful companies, including trading powerhouse Gunvor and Italian energy major Eni, terminated LNG contracts with Pakistan for questionable reasons.

These cancellations worsened the country’s already tenuous energy supply crisis in 2022, including major blackouts. Gunvor reportedly terminated a much-needed LNG deal with Pakistan over alleged underpayment, while Eni negated LNG deliveries and resold the cargoes at a higher prices, earning stellar profits. Another Bloomberg report found that Eni made some US$550 million in profit by reneging on the deal with Pakistan and then re-selling the cargoes to other buyers.

Clean energy pivot

Now, however, that dynamic is changing. Pakistan is looking to sell excess LNG amid a domestic gas supply glut. Why? The country has at least three LNG cargoes in excess that it imported from top supplier Qatar that it has no immediate use for, Reuters reported in early July, citing a government official. Gas is now also being sold at deep discounts to local users, the report added, citing a second government official. Demand for gas is declining, driven by factors such as high electricity costs, worsening economic conditions, and an accelerating pivot toward more renewable energy.

This pivot would have been unimaginable just a few years ago but Pakistan’s solar sector development is now causing gas demand to decline. Even though solar power makes up just a fraction of Pakistan’s energy mix, it has become one of the world’s largest importers of solar panels. In 2024, it imported some 17 GW of solar panels, Ember said, more than double from the previous year, due to favourable government policies, higher electricity costs, power outages and a call for more affordable and reliable energy from residential, commercial and industrial end-users.

However, there’s still room for more improvement going forward. A World Economic Forum report said that Pakistan needs to modernise its grid, address financial barriers, and ensure consistent government support. It also needs to foster both on-grid and off-grid solar development.

(Writing by Tim Daiss; editing by Sophie Davies)