Sui Southern Gas Company (SSGC) has refused to enhance gas allocation for Pakistan Exploration Limited (PEL), which is sought for blending with highly low-pressure gas from Kandra field to pave the way for its consumption by power plants.
“SSGC has earmarked 5 million cubic feet of gas per day (mmcfd) for PEL for blending it with low British thermal unit (BTU) gas from Kandra field. However, PEL seeks a higher allocation of 10 mmcfd,” an official told The Express Tribune.
The reason given by SSGC for turning down the request was that the company was already facing shortage of gas and had no additional supplies available.
Kandra field produces extremely low-pressure gas, with estimated heating value of 143 BTU, which cannot be consumed. PEL wants to enhance its pressure level to at least 400 to 500 BTU to clear the way for its use in power plants.
According to PEL, it could produce 30 mmcfd after mixing the low-pressure gas with high BTU gas. Low BTU gas, having heating value of less than 450 BTU, is ideal for power and fertiliser plants.
Now, sources say, PEL is asking the Ministry of Petroleum and Natural Resources to get the higher gas allocation approved from the Economic Coordination Committee (ECC) of the cabinet.
If approved, PEL will receive 10 mmcfd of gas at $4 per million British thermal units (mmbtu) and sell it to power producers at $8.75 per mmbtu after mixing it with low-pressure gas.
The previous government of Pakistan Peoples Party had announced a low BTU gas policy, which offered maximum price of $8.75 per mmbtu and set minimum price at $6.
The policy was designed to tap the unexplored gas deposits in the face of fast declining old reserves. The producers were given incentives in a bid to attract investment in development of gas fields and energy supply to the power sector.
This could have helped provide an additional 200 mmcfd to the power producers, who depend on expensive furnace oil for electricity production.
At present, there are some fields in the country that have the potential of producing low BTU gas.
Gas production in the country stands at 4.1 billion cubic feet per day (bcfd) and may slump to 1.6 bcfd in 2022 as existing deposits are depleting fast, posing a serious threat to the economy.
In the low BTU policy, the upper cap for heating value was set at 450 BTU per standard cubic feet and more incentives were announced for the heating value below 450.
Under the pricing regime, the heating value of 450 to 600 has been given the price of $6 per mmbtu. The price will be increased by $0.01 per mmbtu for every decline in the unit below the heating value of 450. The minimum level has been set at 175.
Under the new BTU Policy 2011, the government will also charge 25% windfall levy, the difference between applicable price for the low BTU gas and its sale to the third party other than the government.
Published in The Express Tribune, September 6th, 2014.
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