The government has planned to set up 30 liquefied petroleum gas (LPG) air-mix plants with the assistance of gas utilities in Murree, Gilgit, other hilly areas in the north and Azad Jammu and Kashmir (AJK) where the laying of natural gas distribution network is not considered economically feasible, officials say.
In an effort to push ahead with the plan, the board of directors of Sui Northern Gas Pipelines Limited (SNGPL) had already accorded approval for installing 20 LPG air-mix plants in these areas in a meeting held on June 12, 2014.
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These areas have a sizeable number of domestic and commercial consumers who are burning wood to meet their cooking and heating requirements, which in turn is causing rapid deforestation in the country.
According to the officials familiar with the developments, comprehensive site surveys have been conducted to select potential points for the establishment of air-mix plants. Initially, three suitable locations have been identified in Murree.
Pakistan faces an acute shortage of natural gas both for electricity generation and general consumption. The domestic production of 4 billion cubic feet of gas per day (bcfd) could not meet the growing demand as the gap between supply and demand stands at around 2 bcfd and is continuously widening.
The energy scarcity is not only causing hardships for the common people but is also slowing down economic growth. To tackle the challenge, the government is working on a plan that will provide gas through LPG air-mix plants to the areas where piped gas is not economically feasible.
The three sites identified in Murree are Kur Bagla Dewal, Tret and Company Bagh, for which SNGPL has invited tenders according to rules of the Public Procurement Regulatory Authority (PPRA).
However, the company has highlighted that keeping in view policy guidelines of the government, all proposals for air-mix plants were required to be placed before the Economic Coordination Committee (ECC) of cabinet for approval. After that, the projects will be sent to the Oil and Gas Regulatory Authority (Ogra) for determining a rate of return that is equal to the return on gas operations. Ogra will assess the cost of LPG air-mix - a blend of LPG and air - in order to calculate the weighted average cost of gas.
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During the tenure of the previous Pakistan Peoples Party (PPP) government, LPG air-mix plants were approved at a higher rate which sparked controversy. At that time, Ogra estimated that air-mix could be injected into the Sui Southern Gas Company (SSGC) network at a cost of $25 per million British thermal units (mmbtu) as LPG prices were high.
The PPP government planned to calculate LPG prices on a weighted average basis and as a result all consumers, except for domestic consumers, were expected to face a price hike of up to 9.9% with the injection of 50 million cubic feet of LPG air-mix per day as approved by the ECC.
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, the 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 air-mix plants would spark a sharp rise in gas prices for the end-consumers. It, however, insisted that to protect the consumers, the air-mix plants should work as a standalone and be not made part of the larger system.
Published in The Express Tribune, April 6th, 2016.
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