Govt mulls ban on gas supply to industries

The government is considering placing a moratorium on gas supply to industrial units for generating their own electricity in the wake of depleting gas reserves and surplus electricity in the country.

However, those industrial concerns which have captive power plants will be encouraged to apply for new electricity connections from the power distribution companies.

Sui Southern Gas Company (SSGC) and Sui Northern Gas Pipelines Limited (SNGPL) are engaged in the transmission and distribution of natural gas in the country.

Except for a few dedicated gas consumers ie power plants/ independent power producers (lPPs) and fertiliser plants, gas to all other bulk consumers including power producers, fertiliser units, industrial concerns, compressed natural gas (CNG) stations, cement and residential consumers is supplied through the extensive network of the two gas utilities.

With the passage of time, the gas available for sale with SSGC and SNGPL has decreased due to natural depletion of reserves. On the other hand, new gas discoveries have barely kept pace with the fall in reserves and there has been no net increase in locally produced gas supply for the past many years.

A comparison of natural gas production over the last two financial years shows a depletion of about 9.4%, which translates into over 400 million cubic feet of gas per day (mmcfd). In order to optimally use the scarce resource, an exercise was undertaken for assessing the consumption of gas by the captive power plants.

Out of the total 1,211 captive power plants, only 227 (159 under SSGC and 68 under SNGPL) are co-generation units, which not only generate power for self-consumption but also generate heat energy for industrial use. SNGPL supplies re-gasified liquefied natural gas (RLNG) to the captive power plants (non-export) at a price determined every month by the Oil and Gas Regulatory Authority (Ogra) whereas similar units in Sindh, Khyber-Pakhtunkhwa (K-P) and Balochistan operate primarily on locally produced gas supply.

Similarly, the captive power plants (export) receive a blend of locally produced gas and imported LNG at a tariff of $6.5 per million British thermal units (mmbtu) in Punjab whereas similar units in Sindh, K-P and Balochistan operate on system gas supply with the exception of a special arrangement for Rs930 per mmbtu for this winter till February 28, 2021.

Every winter, demand from the high-priority sector - residential consumers - increases manifold and gas utilities, while remaining within the available supplies, are constrained to undertake load curtailment programmes keeping in view the priorities.

Domestic and commercial consumers fall in the first category whereas the power sector and major export-oriented industries feature in the second category.

General industrial fertiliser and captive power plants (industry) stand in the third category and cement sector including its captive power plants falls in the fourth category. The CNG sector features in the fifth category.

The gross/ installed power generation capacity in the country is estimated at 38,707 megawatts whereas the anticipated capacity of power projects in the pipeline is 12,464MW.

In FY20, against generation of 27,780MW of electricity, the demand peaked at 26,252MW. With sufficient availability of electricity, the continued supply of a depleting resource ie natural gas to the captive power plants does not appear to be rational, which cannot match the efficiency of gas/ RLNG-based IPPs on the national grid, say officials.

Accordingly, the Petroleum Division came up with policy guidelines with respect to gas supply to the industrial units generating their own electricity.

First, natural gas supply shall be discontinued with effect from February 1, 2021 to all industrial units that are currently using it as fuel for the primary purpose of electricity generation for self-consumption.

However, this moratorium/ discontinuation of gas supply will not apply to those industrial units which are either not connected to the electricity distribution grid or using it as fuel for the primary purpose of steam generation (co-generation units); or to the extent, and until such time, they are unable to be fully served by the relevant power distribution company for their electricity requirement.

Those industrial units that are currently using natural gas as fuel for the primary purpose of electricity generation but are not connected to the national electricity grid shall be actively encouraged and expected to apply for a new connection from the relevant distribution company as soon as possible and to be completed no later than December 1, 2021.

Published in The Express Tribune, January 14^th, 2021.

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