SSGC plans to start power production

Company diversifying business due to fall in gas supplies from fields

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KARACHI:

State-owned gas marketing firm Sui Southern Gas Company (SSGC) has decided to diversify its business, as the company has announced that it will start power production following a continuous drop in gas supplies from domestic fields.

Its subsidiary company will also work on projects like producing gas from coal, biogas, bio-methane and hydrogen gas. “SSGC Alternate Energy (Pvt) Limited, a fully owned subsidiary of SSGC, has been incorporated as a private limited company under the Companies Act 2017,” the company said in an announcement on Saturday.

The business model of SSGC Alternate Energy will mainly revolve around alternative energy projects such as renewable or environment-friendly fuels like biogas and bio-methane, electricity generation from thermal energy, futuristic energy projects like coal-to-gas production and hydrogen production, the announcement added.

Furthermore, the company has planned to deal in waste water treatment and transportation, and other energy projects. Preliminary information suggests that the diversification of SSGC’s business had been under consideration for the past six months or so with a “coal-to-gas project” in the mind.

Later, the company broadened its vision by including other energy projects as well, The Express Tribune has learnt. Scientists are already working on producing gas from coal, because the country has started extracting the dirty fuel from one of the world’s largest coalmines in Thar (Sindh) a couple of years ago.

Background information indicates that a fertiliser manufacturing company can use the gas produced from coal as gas is a main raw material in fertiliser manufacturing. In the meantime, companies in the private sector are also working on introducing hydrogen as a fuel in the future, which belongs to the environment-friendly fuels.

“SSGC has taken a good decision … ahead of the liberalisation of power market in the country,” remarked Pak-Kuwait Investment Company Head of Research Samiullah Tariq. The government will open the power market sometime in 2023, where multiple buyers and sellers will operate. At present, the government is the only buyer of electricity from all producers.

“Commercial launch of the Competitive Trading Bilateral Contract Market (CTBCM) will help control circular debt and eliminate transmission and distribution losses,” Tariq said.

“SSGC may be considering taking lead in the CTBCM,” he pointed out, adding that the “CTBCM trail projects are in operation in the country”.

Secondly, Karachi regularly faces a power shortfall despite the supply of electricity from the national grid to the city.

“The gas utility may be eyeing the power deficit in Karachi because it will be difficult for the federal government to supply additional power from the national grid in the near future,” he said.

The cost of setting up renewable energy projects like solar and wind has also gone down. Earlier, their cost stood higher compared to thermal projects.

The National Electric Power Regulatory Authority (Nepra) is going to introduce a wheeling tariff for the power producers who will utilise the available infrastructure (transmission and distribution network) to transport electricity to the buyers.

SSGC has opted for diversifying its business after the oil and gas exploration firms failed to find new meaningful hydrocarbon deposits and gas supplies from fields continued to shrink, which dented its sales and profit margins.

The company sold 85,316 million cubic feet (mmcf) of gas in three months ended September 30, 2021 compared to 87,785 mmcf in the same period of 2020, according to the company’s latest quarterly financial statement dated September 16, 2022.

Its sales decreased to Rs153.23 billion in the first half of fiscal year 2021 compared to Rs161.36 billion in the same period of previous year, according to the company’s latest profit or loss account.

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

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