Analysis: The impact of 15-day gas curtailment

KARACHI:

The Ministry of Petroleum has proposed 15 days monthly gas load shedding for the fertiliser industry amid the growing gas shortage in the country.

The worst part is that this will be over and above the gas curtailment plan of 20 per cent to Sui and 12 per cent to the Mari Gas network introduced last year. This will set a stage for another urea price increase, said Topline Securities analyst Farhan Mahmood in a research note.

“We expect urea price to go up further by Rs400 to 450 per bag in the next three to four months triggered by plants operating on the Sui Northern network,” adds the note.

Pakistan’s current urea manufacturing capacity is around 6.5 million tons of which approximately 2.3 million tons is installed on Sui Northern Gas network (SNGPL).

Adjusting the gas curtailment of 20% agreed last year, the annualised effective capacity on SNGPL network would be around 1.8 million tons. Thus, with additional gas shortage of 15 days a month, local urea production would decline by round 0.9 million tons.

To compensate the production losses, the government will opt for additional import of 0.9 million tons of urea, thus, increasing shortfall to around 2.4 million tons.



Published in The Express Tribune, July 30^th, 2011.