Pakistan and Russia have agreed to deepen cooperation in the energy sector as they will jointly set up liquefied petroleum gas (LPG) air-mix plants in an effort to tackle the persisting energy crisis.
“For establishing the LPG air-mix plants in Pakistan, Russia has nominated its company RusGaz Engineering; technical discussions have already been held and the two sides have proposed May 2016 as the timeframe for making the plants operational,” an official aware of the developments told The Express Tribune.
Pakistan and Russia are already working closely in the area of liquefied natural gas (LNG) and have signed a government-to-government deal for laying the North-South pipeline from Lahore to Karachi for LNG supply. However, a commercial agreement has not yet been inked.
State-run gas utilities have a huge pipeline network to provide locally produced natural gas to consumers across the country, but they fall way short of meeting the growing demand.
The LPG air-mix plants will discourage the laying of new pipelines. Already, Sui Southern Gas Company (SSGC) has set up LPG air-mix plants in Balochistan.
In order to keep a check on LPG prices that normally go up during winter when demand rises, the Ministry of Petroleum and Natural Resources has sent a summary to the Council of Common Interests (CCI) seeking approval for regulating the consumer prices of LPG, officials say.
The government believes that fixing of LPG prices by the Oil and Gas Regulatory Authority (Ogra), like other petroleum products, will lead to a fall in rates.
During the previous government of Pakistan Peoples Party (PPP), the LPG air-mix plants were approved at a higher rate which sparked controversy. At that time, Ogra estimated that LPG air-mix could be injected into the SSGC system at $25 per million British thermal units (mmbtu) as prices were high.
The PPP government had planned to calculate LPG prices on weighted average basis and as a result all consumers, except for domestic consumers, were expected to face a price rise of up to 9.9% with the injection of 50 million cubic feet of LPG air-mix per day as approved by the Economic Coordination Committee.
However, now LPG prices have come down and the government is going to regulate the market to make the commodity affordable for the consumers. Therefore, officials suggest, it would be feasible to inject LPG into the pipeline network of gas utilities when prices stand lower.
In the past, Ogra had opposed the scheme, arguing that the LPG air-mix plants would lead to a sharp increase in the cost of gas for the end-consumers. The regulator, however, insisted in order to protect the consumers, the air-mix plants should work as a standalone and not be made part of the larger system.
Still, the regulator pointed out that mixing of LPG and air was not feasible and the method had not been adopted for the same reason in other parts of the world. Only Argentina has installed such plants, its officials told the ECC.
Published in The Express Tribune, January 9th, 2016.