Pakistan is one of the largest consumers of natural gas. Natural gas serves many sectors including captive power, transport, commercial and residential. Pakistan has a wide distribution network run buy two public utility companies Sui Southern Gas Company Ltd (SSGC) and Sui Northern Gas Pipelines Limited (SNGPL). In 2021, a total of 4,084 MMCFD was consumed, and projections show that demand will be more than 5,500 MMCFD in 2031. The residential or domestic sector was the second highest consumer, requiring 888 MMCFD to match the demand. In domestic sector, natural gas is primarily used for space heating, cooking and water heating. There are currently 3 types of water heaters being used in Pakistan: gas storage, gas instantaneous and electric storage water heaters.
Manufacturers: There are several manufacturers of water heaters in Pakistan. The water heater industry can be broadly divided into two categories: i) Sophisticated large manufacturer ii) Artesian manufacturer. The latter are units that own workshops where they are able to handle sheet metal and perform welding and fitting jobs. During the heating season they turn their workshops into gas storage manufacturing units for a couple of months and perform other metal related jobs during the rest of the year.
There are 7 to 8 large water heater manufacturers in the organized sector, and they have 50% to 60% of the market share. Most of these manufacturers produce all three types of water heaters; however, each has a preference for a certain type.
Stock: An approximate 6 million water heaters are estimated as the installed stock as of 2020 however interactions with retailers and manufacturers show that there is a significant shift in consumer preference from gas storage to gas instant type of water heaters since 2015. Modelling based on data collected shows that stock is expected to reach 12 million units by 2030.
1. Current Market Dynamics
Pakistan’s indigenous gas supply is on the decline and the country has experienced an acute shortage of natural gas since 2015. As one of the mitigating measures, NEECA engaged CLASP to help develop and update regulations for all water heating products in 2021. Last year Government started initiatives to add conical baffle to water heater to improve the efficiency and save gas.
Market share of gas instants and electric storage water heaters is rising relative to the gas storage type water heater. This is mainly due to shortage in gas supply as well as diminishing gas pressure during the winter months. Even though the gas instant required more pressure to operate than the storage variety; the former is being produced in large numbers where the fuel is imported LPG. A tweak to the burner design is required to run these on LPG. Some companies provide dual fuel gas instants as well which can interchange between natural gas and LPG. The electric storage is gaining market share very slowly again due to gas shortage. The gas storage water heater which has the largest installed stock is still produced in large numbers and is expected to sell well for another 05 or so years.
Initially most of the equipment for gas instant water heater was being imported. But due to import restrictions [due to dwindling foreign reserves] manufacturers
are shifting towards a local supply chain, and this has led to innovation and experimentation.
- Key Observations and Lessons
The CLASP Pakistan team commenced work on the water heater accelerator program on 1st January 2023. Detailed meetings were held with participants at the SAMA^Verte office as well as participants’ offices and factories. We also met other stakeholders and suppliers to the industry. The following key information or updates are pertinent to mention here:
- With depleting gas reserves LPG run instants and electric storage ones are gaining market share. However, it was confirmed that the gas storage heater which has the largest installed stock in the country is still selling and sales are growing all be it at a low growth rate of 1 to 2 %.
- The key standout requirement identified by all manufacturers alike is access to good quality labs. Manufacturers have shown the intent to establish labs at their facility. One participant company owner is willing to put in investment for setting up a reasonably priced lab at their premises with CLASPs technical support. The company is willing to let other water heater companies utilize the lab as well.
- Local manufacturing of burners for gas instant water heaters has started, one company has installed local burners in their 1/3rd I.e., 15,000. Due to recent import restrictions innovation and self-reliance is on the rise and the accelerator team will look to support these activities.
- It can be concluded from meetings and factory visits that there is value in supporting with the production and supply of all three types of water heaters.
Accelerator Objectives & Activities
This program will focus on providing technical support to 4 water heater manufacturers. Areas of assistance will be tailored to individual manufacturer needs as well as cover improvement in general areas for the benefit of all participants. These activities will include support with design & manufacturing techniques, materials & procurement, in-house lab improvement guidance and awareness on other best practices.
IAP objectives are to:
- Improve the efficiency of participants’ products so that a number of their products can qualify for the standard efficiency level and potentially speed up the move to higher star levels on NEECA label when NEECA is able to roll out their S&L program.
- Support the capacity of suppliers to create compliant products for domestic sale but additionally also facilitate exports.
The main activities planned for the IAP for Water Heaters are:
Baseline testing and test labs construction.
- Conducting a baseline testing exercise at an acceptable or improved manufacturers lab.
- Improving test lab facilities at a manufacturers factory who are able to fund the capital cost and this can be demonstrated to other participants of the program.
- Get US DoE regulatory engineering breakdown.
- Purchase Australian WH standard
Purchase and ship US Gas and Electric water heaters for deconstruction and for dissembling and analysis. CLASP USA will do this directly at their end.
In addition to providing the above-mentioned documents to participants, the CLASP team will do a write up which will help manufacturers better understand the documents mentioned above.
The demonstration activity and physical working on the various sections of the appliance with manufacturers will help them get a more firsthand feel of the gaps they need to bridge. In conjunction with the cutting down activities done by DOE this will help manufacturers develop customized road maps for making the desired improvements.
- Visit to China by representatives from participating companies.
- CLASP to facilitate visits to test labs and manufacturing facilities.
The purpose of these visits to well-established water heater testing labs in China to learn about test methods, processes, and equipment used in testing. The benefits may include:
- Access to expertise: Established testing labs in China will have experienced personnel with specialized knowledge in water heater testing. By visiting these labs, manufacturers can tap into this expertise and gain insights into best practices, industry standards, and regulations related to water heater testing.
- Learning about test methods and processes: Testing labs in China may utilize different test methods and processes compared to those used in other countries. By visiting these labs, manufacturers can learn about the specific test methods and processes employed in China, which can help them better understand the local market requirements and tailor their products accordingly.
- Familiarization with equipment: By visiting these labs, manufacturers can familiarize themselves with the equipment used in testing, which can be helpful in establishing a lab in their own facility.
- Networking and partnerships: Visiting testing labs in China can provide manufacturers with opportunities to network and establish partnerships with local industry experts, which can lead to collaborations, knowledge-sharing, and potential business opportunities.
This will entail carrying out a Water Heater volume testing exercise.
Currently there are a lot of variations in the market in terms of product volume for a certain declared size of water heater. As such gas consumption deemed acceptable for a certain size may turn out to be misleading as that particular appliance may actually be much smaller than what is being declared and hence not as efficient as originally perceived.
Participants were also of the view that this exercise will have a demonstration effect for the government [NEECA and PSQCA] to learn how they can monitor this space.