Fertiliser plants on SNGPL network face Rs5.5b losses

Total urea sales have declined 52%; production down 33%.

LAHORE:

In the first half of 2012 (1H-CY12), fertiliser plants on the Sui Northern Gas Pipelines Limited (SNGPL) network faced collective losses to the tune of Rs5.5 billion in lost revenues. These plants include Agritech, Dawood Hercules Fertilizers, Pak-Arab Fertilizer and Engro’s Enven project.

Total urea sales of these plants stood at 150,000 tons, which is 166,000 tons or 52% less than the 316,000 tons of urea sold in the first half of 2011. The lost sales translate into revenue foregone amounting to Rs5.5 billion, say fertiliser sector officials.

Total urea production by SNGPL-based plants in the first half of 2011 stood at 297,000 tons, which declined by 33% to 198,000 tons in 1H-CY12. These SNGPL-based plants operated at only 18% of their capacity in 1H-CY12, versus 25% in the corresponding period last year.

During 1H-CY12, SNGPL-reliant fertiliser plants faced an estimated gas curtailment of 82%, under which Agritech and Pak-Arab Fertilizer received gas for 63 days each, while Engro and Dawood Hercules received gas for 33 days each.

In first quarter of year 2012, all SNGPL-based plants, as well as Sui Souther Gas Company-based Fauji Fertilizer Bin Qasim faced revenue losses of up to 53%, compared with the first quarter of 2011. They generated Rs8.16 billion in revenues in the first quarter of 2012, compared to last year’s Rs17.29 billion rupees, said industry experts. In 2012, these plants lost profitability by 125%, and incurred collective losses of Rs1.076 billion, whereas the same plants had earned profits of Rs4.3 billion in the corresponding period of 2011.

According to an official from the fertiliser sector, SNGPL-based plants are facing their worst-ever crisis, as 82% gas curtailment was never witnessed before 2012. He said that despite investments worth $2.3 billion made in the last four years on expanding production capacity, the country is sitting on idle urea capacity of over three million tons.

The official said that if gas curtailment continues during the remaining five months of 2012, these plants may be forced to shut down permanently, resultantly laying-off highly-skilled manpower. This would also put additional burden on the national exchequer, as urea would have to be imported to meet the shortfall in the country. Other Fertiliser sector officials say that not only fertiliser plants, but the entire farmers’ community and the government would be the ultimate losers in such a scenario.

Published in The Express Tribune, July 26^th, 2012.