Govt diverts gas supply to Engro permanently

Power ministry makes objection, says power producers should be given priority over fertiliser plants


Zafar Bhutta February 26, 2016
Under the Fertiliser Policy 2001, the government had dedicated shallow reserves of the Mari field to the fertiliser industry whereas deep deposits were earmarked for the power producers. PHOTO: FILE

ISLAMABAD:


The government has permanently diverted 60 million cubic feet of gas per day (mmcfd) to Engro Fertilizers from the Genco-2 power plant despite opposition from the Ministry of Water and Power.


In a meeting of the Economic Coordination Committee (ECC) on February 18, the Ministry of Petroleum and Natural Resources recalled that the ECC had approved allocation of 183 mmcfd of gas to power producers with the consent of then prime minister on April 23, 2010.

Power ministry opposes gas supply to Engro plant

This could be achieved by curtailing supply of 53 mmcfd from consumers of Sui Northern Gas Pipelines, 70 mmcfd from consumers of Sui Southern Gas Company and 60 mmcfd from fertiliser plants connected to the Mari gas field.

As a result, 60 mmcfd was diverted to the Guddu thermal power station. Later, this gas was again earmarked to the fertiliser plants from July 2013.

The ministry insisted that 60 mmcfd from the Mari field belonged to the fertiliser sector and therefore it should be permanently supplied to the Engro plant in order to avoid disrupting urea production in the country.

Under the Fertiliser Policy 2001, the government had dedicated shallow reserves of the Mari field to the fertiliser industry whereas deep deposits were earmarked for the power producers.

ECC seeks law ministry’s view on gas supply to Engro

After holding discussions, the ECC decided to divert 60 mmcfd to the fertiliser manufacturer with effect from February 22, 2016.

However, the Ministry of Water and Power objected to the proposal of continuing gas supply to Engro Fertilizers from the Mari field and wanted to divert it back to the Genco-2 power plant. Engro has continued to receive gas from the field since July 2013.

The water and power ministry’s remarks came following a summary sent by the petroleum ministry to the ECC, suggesting that since the gas belonged to the fertiliser plants, it should permanently remain with them.

Earlier in a meeting held on December 24, 2014, the ECC permitted Engro to consume 60 mmcfd from the Mari shallow reserves after the company agreed to install a gas-boosting compressor for the 747-megawatt combined-cycle Genco-2 power plant. Gas diversion to Engro was valid until December 21, 2015.

The water and power ministry insisted that according to the government’s decision, the power sector stood second in priority after domestic consumers in gas allocation.

Gas supply to be diverted from Engro to Guddu plant

As such, it said, the power sector should be given priority over fertiliser plants and the Guddu plant was the largest power generation facility in the public sector with available capacity of around 1,320MW.

Apart from this, rehabilitation work was under way to increase the capacity by 360MW by the end of the year. As such, the plant required adequate gas supply.

The ministry said 60 mmcfd was taken from Genco-2 in July 2013 and given to Engro in a temporary arrangement. Through a contract between Genco-2 and Engro, it was agreed that the latter would continue to use the gas until December 2015 and install a gas compressor at the power plant.

“In view of this, the Ministry of Water and Power reiterates that the gas should be allocated to Genco-2 in compliance with the ECC’s earlier decision and the agreement between Engro and Genco-2.”


Published in The Express Tribune, February 27th,  2016.

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COMMENTS (5)

foolish | 6 years ago | Reply Money talks. Engro was granted Thar coal mining rights even though it had zero mining experience. The govt then came in a guaranteed financing for the Thar coal mining project after Engro refused Chinese demands for them to put in more of their own equity. Engro was also granted the right to build the first LNG terminal even though it had zero experience in building LNG terminals ... Engro turned around and subcontracted that facility to a European Company - but did negotiate a significant minimum payment which once again allowed Engro to participate in a mega project with almost non of it's own equity. Nobody raised a fuss - not one newspaper wrote an article asking why any of this made any economic sense ... as I said ... money talks.
Engro asad | 6 years ago | Reply Hey isn't Asad Umer a major shareholder in engro. Oops, I guess pti up to corruption with pmln.
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