Cabinet fails to allocate gas

ISLAMABAD:

The cabinet has refused to allocate gas supply to a fertiliser plant following opposition from its members and has referred the matter to the Cabinet Committee on Energy (CCOE) for consideration.

In a recent meeting of the cabinet, most of its members were of the view that provinces should be given precedence, as stipulated under Article 158 of the Constitution, and they should be taken on board.

They pointed out that provinces had not been taken on board and the matter may be referred to the CCOE for deliberation and an in-depth analysis.

The Petroleum Division proposed to the cabinet to allocate 68 million cubic feet of gas per day (mmcfd) from the Mari (shallow) gas reservoir to Fatima Fertiliser.

The cabinet decided that the matter should be referred to the CCOE, which after detailed deliberations may submit recommendations for approval.

Sources told The Express Tribune that the Petroleum Division briefed the cabinet that Mari Petroleum Company Limited (MPCL) was operating the Mari development and production lease/ Mari gas field in Ghotki district of Sindh.

Gas was being produced from the shallow and deep reservoirs namely Habib Rahi Limestone, Pirkoh Limestone, Sul Upper Limestone, Sui Main Limestone and Goru-B/ Tipu (deep reservoir).

Gas produced from the Mari gas field was primarily sold to the dedicated fertiliser plants and power producers.

Current customers of gas produced by the Mari field are Engro Fertilisers, Fauji Fertiliser, Fatima Fertiliser, Pakarab Fertiliser, Foundation Power Company Deharki Limited and Thermal Power Station Guddu (TPSG)/ Genco-II.

MPCL, on an average, produces about 750 mmcfd of gas (695 mmcfd from the shallow and 55 mmcfd from the deep reservoir). Gas was priced under the two pricing regimes.

The Economic Coordination Committee (ECC) had initially approved allocation of up to 60 mmcfd from the Mari field (shallow reservoir) to the Thermal Power Station Guddu, which was subsequently revised upwards to 110 mmcfd with additional allocation of 50 mmcfd.

Total gas allocation from the Kandhkot and Mari fields to the Guddu power station stands at
360 mmcfd.

The ECC, besides revalidating the allocation of 200 mmcfd (150 mmcfd from Pakistan Petroleum and 50 mmcfd from Sui Northern Gas Pipelines), which had expired, approved additional supply of 50 mmcfd from the Kandnkot field. The additional supply started in June 2017.

Erratic gas offtake on a year-on-year basis depicts that the Guddu power station has not been able to fully utilise the allocated gas, resulting in “non-monetisation of gas produced by Pakistan Petroleum and MPCL as well as loss of opportunity”.

Fatima Fertiliser and Agritech Limited, with urea production capacity of 79,000 tons per month, are being operated with the help of 10 mmcfd of subsidised re-gasified liquefied natural gas (RLNG) at a price of Rs839 per million British thermal units (mmbtu) against actual average cost of RLNG during FY22, which was $15 (Rs2,925) per mmbtu.

One of these plants is consuming 41 mmcfd of RLNG for the production of up to 45,000 tons of urea per month.

The Petroleum Division pointed out that the fertiliser plant at times operated at less than half of the available production capacity whereas the government incurred a subsidy of approximately Rs21 billion in a period of four years.

An amount of Rs27 billion would be required for operating the plant on RLNG at the price cap, the division revealed.

It submitted a proposal seeking allocation of 68 mmcfd, out of the total allocation of 110 mmcfd to the Guddu power station, to Fatima Fertiliser “on a firm basis”. The proposed 68 mmcfd includes 50 mmcfd being utilised by SNGPL on “as and when available” basis.

The Finance Division and the Ministry of Industries supported the proposal whereas the Ministry of Planning did not endorse it.

The Power Division proposed the allocation of gas on “as and when available basis” and the withdrawal of “take-or-pay” clause from the MPCL’s pending term sheet.

Published in The Express Tribune, July 24^th, 2022.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.