Imprudent allocation of pipeline quality gas

It is high time that the criteria for allocation and management policy of natural gas and RLNG should be reviewed

Pakistan is a fortunate country where every citizen can have an opinion on topics ranging from politics to economy. However, their opinions are swayed by their opinion leaders, amongst whom media is the most effective. If there is a discussion on what is the biggest issue in the country, there would be voices claiming corruption as the biggest issue. Others would argue that ‘incompetence’, ‘misgovernance’ or ‘delays in justice’ are the biggest issues and so on. However, the media has almost succeeded in convincing the masses that the most disturbing issue currently in Pakistan is soaring commodity prices or ‘inflation’. The media is probably right! But then comes the question of what causes the inflation. Again, all sorts of opinions could be formulated. Those nearer to power corridors would quickly like to blame the previous rulers who, in turn, may like to claim incompetency of the current power merchants as the biggest reason that caused inflation. But howsoever big the list of opinions is, the fact remains that there must be a solution or a set of solutions to control the inflation. One of underlying contributors to inflation is high electricity cost, which is predominantly dependent upon imported fuels bought through expensive dollars.

Nevertheless, there are other reasons too for the high power tariff, one of which is ‘imprudent allocation of pipeline quality gas’ to power generating units which results in supply of precious pipeline natural gas resource to inefficient power generating units instead of efficient units. Because of this criteria, units 5 to 9 of GTPS Faisalabad power generation complex, whose best net efficiency remains at 21.1% [reference: page 127, State of Industry Report 2021 published by NEPRA], achieved 11^th rank on the economic dispatch merit order for January 2022 [available on NTDC website]. Likewise, units 4 and 3 of Muzaffargarh Power Complex achieved 18^th and 19^th ranks on economic dispatch merit order for generating electricity even though the best net efficiency of Muzaffargarh Power Complex is only 32.51% [ibid]. This 32.51% net efficiency of Muzaffargarh is the best amongst the GENCOs (public sector power generation companies) barring Gudu Power complex’s latest 747 MW CCP units. On the contrary, QATPL Bhikki power plant whose net efficiency is almost double — 61.60% [page 135, ibid] — is low on merit, ranked at 36. The only comprehensible reason for the lower position of QATPL Bhikki on dispatch merit order is allocation of comparatively very expensive imported reliquefied natural gas (RLNG) as the primary fuel instead of natural gas.

This relentless guzzling of scarce natural resource in the country is weighing heavily on the economy. Not only the same molecules of gas guzzled in the inefficient units of GENCOs could have produced more kilowatts of electricity by the efficient power plants such as QATPL Bhikki, their impact on total electricity price would have also been quite prominent. By way of example, one MMCFD of natural gas used at any power complex with 32.51 % net efficiency could produce only 80 megawatt-hours (MWh) energy in a day. On the other hand, the same quantity of gas could produce 151 MWh energy daily if used in an efficient thermal power plant with net efficiency of 61.6%.

On the cost front, if 32.51% net efficiency translates to Rs9.47/kWh, the efficient power plant with net efficiency of 61.60% would cost only Rs5.01/kWh — hence a saving of Rs4.46 for each replaced unit of electricity. With allocation of 300 MMCFD pipeline quality natural gas and 90% availability, the annual saving would be equal to more than Rs66.5 billion on account of cheaper units, whereas more than 7000 GWh additional units would also have been generated with the same quantity of precious natural resource. The savings would be more prominent when the more inefficient units, such as that of GTPS Faisalabad, are replaced or allocation of pipeline natural gas to efficient plants is increased beyond 300 MMCFD. This is just one simple example and many other analytical case studies and price sensitivities may be commissioned to get a clearer picture.

It is high time in the interests of country that the criteria for allocation and management policy of natural gas and RLNG should be reviewed. Instead of a rigid criterion, policy should be amended to make flexible criteria based on availability of resource and its optimum usage mainly relying on efficiency and maximum benefits to the economy.

Published in The Express Tribune, March 2^nd, 2022.

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