ISLAMABAD: Pakistan’s indigenous natural gas production declined by 8 percent in FY25, while consumption of imported Regasified Liquefied Natural Gas (RLNG) in the power sector plunged by 24 percent as expanding distributed solar generation displaced expensive fuel-based electricity, according to Renewables First’s Pakistan Energy Market Review.
Thank you for reading this post, don't forget to subscribe!The report highlights how the rapid adoption of rooftop and other distributed solar systems is reshaping Pakistan’s energy landscape, reducing reliance on imported fossil fuels and generating substantial foreign exchange savings. However, it also points to gaps in official energy statistics that fail to capture the growing contribution of distributed solar.
Gas Production and RLNG Consumption Decline
Domestic natural gas production fell by 8 percent year-on-year in FY25, reversing a brief period of stability during FY23 and FY24. The decline reflects the depletion of mature gas fields and limited exploration activity, which have constrained the development of replacement supplies. Excess RLNG availability also led to curtailment of domestic gas production.
LNG imports declined by 4 percent year-on-year to 8.7 million tonnes of oil equivalent (Mtoe) in FY25, slightly below the five-year average of 9 Mtoe. The reduction was largely driven by lower RLNG-fired power generation amid increasing solar adoption.
Reduced demand from power plants resulted in surplus contracted LNG volumes, prompting cargo deferrals and diversions to international markets.
Natural gas demand in the power sector fell by 17 percent year-on-year as distributed solar reduced grid electricity requirements and RLNG-based power plants remained lower on the economic merit order. Consequently, RLNG consumption in the power sector contracted by 24 percent during FY25.
In contrast, RLNG consumption in other sectors increased by 54 percent year-on-year, reflecting the persistent shortage of domestic gas and the government’s efforts to divert surplus LNG towards industrial consumers.
RLNG held in gas pipelines increased by 23 percent, raising line-pack pressure, contributing to the curtailment of indigenous gas production and increasing the need for cargo diversions.
Domestic-sector natural gas consumption declined by 10 percent year-on-year, reaching its lowest level during the review period amid government interventions, supply curtailments and higher tariffs.
Industrial gas consumption, however, increased by 3.6 percent, supported by improved industrial activity. Export-oriented industries and cement production were the principal drivers, although annual demand remained the second-highest since FY20.
Distributed Solar Delivers Major Import Savings
Renewables First identifies distributed solar as a significant but largely unrecorded component of Pakistan’s energy system. Its growing contribution has created gaps in official statistics, resulting in an incomplete assessment of the country’s energy supply, consumption and economic transformation.
Official figures show that primary energy supply increased by only 1.6 percent in FY25, while reported energy consumption grew by 8 percent. However, these figures do not fully account for electricity generated through rooftop and other distributed solar installations.
The report estimates that distributed solar helped Pakistan avoid approximately $15 billion in fossil fuel imports by FY26, easing pressure on foreign exchange reserves.
Imported fossil fuels accounted for around 34 Mtoe, or 41 percent of Pakistan’s primary energy supply in FY25, compared with 37 percent in FY24. This growing dependence exposes the economy to international price volatility and potential supply disruptions.
According to the report, solar panels and inverters imported at a cost of $8.9 billion up to FY26 have helped Pakistan avoid nearly $14.7 billion in fossil fuel imports.
An additional investment of $4.57 billion in future inverter replacements is projected to prevent another $109 billion in fossil fuel imports between FY27 and FY50.
The resulting cumulative savings are estimated at approximately $124 billion over FY17-FY50, equivalent to $9.23 in avoided fossil fuel imports for every dollar invested, even without accounting for inflation or potential increases in RLNG and coal prices.
The report therefore estimates that every dollar spent on importing solar panels and inverters can save approximately nine dollars in fossil fuel imports over the equipment’s lifetime. Solar technology is increasingly replacing imported RLNG and coal for power generation, turning one-time equipment imports into sustained reductions in the country’s fuel import bill.
Oil Supplies and Imports Increase
Oil supplies increased by 15 percent year-on-year in FY25, accounting for 24 percent of total primary energy supply, largely due to transportation requirements.
Despite a 10.5 percent increase in annual crude supplies, domestic crude oil production declined by 12 percent. The continued decline reflects depletion of mature fields, weak reserve replacement and limited investment in upstream exploration and production.
Crude oil imports increased by 20 percent year-on-year to meet refinery requirements. Imported crude now accounts for 77 percent of local refinery requirements, making refinery operations increasingly dependent on external supplies.
Petroleum consumption in the power sector plunged by 77 percent year-on-year in FY25, reflecting the shift away from expensive oil-based generation following plant retirements and the growing contribution of distributed solar.
Meanwhile, industrial oil demand increased by 3.2 percent to 1.14 Mtoe, supported by stronger manufacturing activity and higher industrial fuel requirements.
Coal Production and Imports
Indigenous coal production declined by 3 percent year-on-year in FY25, marking its first annual reduction since FY15. Its share of national coal supply consequently fell by six percentage points, reflecting operational constraints and lower output from mature coalfields.
Coal imports increased from 3.6 Mtoe in FY24 to 4.6 Mtoe in FY25 to meet demand from power generation, brick kilns and other industrial consumers.
However, expanding Thar lignite production and government plans to shift existing coal-fired power plants towards domestic coal could limit future import growth, keeping volumes below previous peaks.
Coal consumption in the power sector remained unchanged overall, although it declined by 9 percent year-on-year in FY25 due to changes in plant dispatch and utilisation. Greater reliance on domestic lignite is expected to sustain coal’s role in Pakistan’s energy mix in the coming years.
Solar Electrification Expands Across Sectors
The report identifies the domestic sector as the leading segment in distributed solar adoption, with an electrification rate of 48 percent. Nearly half of its annual energy demand, however, continues to rely on natural gas, indicating significant potential for further electrification.
Industrial electrification increased from 20 percent to 25 percent between FY23 and FY25, driven by growing solar adoption among industrial consumers.
In agriculture, reliance on grid electricity declined for the third consecutive year as rising tariffs accelerated the shift towards solar. Solar electrification in the sector increased by 80 percent year-on-year in FY25.
However, official statistics classify agricultural high-speed diesel (HSD) consumption under transportation, leaving the displacement of diesel used by solar-powered tubewells unaccounted for in reported electrification rates.
The transportation sector remains the largest consumer of oil products and the least electrified segment of the economy, highlighting the need for accelerated electrification to reduce dependence on imported petroleum products.
The review underscores the growing role of distributed solar in reshaping Pakistan’s energy demand, reducing fossil fuel imports and changing the economics of conventional power generation. It also highlights the need to incorporate distributed generation into official energy statistics to provide a more accurate picture of the country’s evolving energy mix.
Story by Mushtaq Ghumman
