Spanner in the works: ECC body revises gas supply plan for fertiliser firms

Rejects spending of $400m from infrastructure cess on the programme.

ISLAMABAD:

A sub-committee of the Economic Coordination Committee (ECC) has turned down a plan to spend $400 million from the gas infrastructure development cess (GIDC) on gas supply to the struggling fertiliser firms and has instead come up with a revised plan, say sources.

The new plan will be taken up by the ECC in its meeting to be held on Tuesday next week.

The petroleum ministry has called for ensuring supply of 202 million cubic feet of gas per day (mmcfd) to the fertiliser industry as persistent gas shortage has disrupted their production process and slashed output.

Of the 202 mmcfd, OGDC will provide 130 mmcfd from Kunnar Pasakhi Deep field, 15 mmcfd from new Bahu field and 10 mmcfd from the new Reti Maru field. Mari Gas Company will supply 22 mmcfd and MOL will provide 25 mmcfd from Makori East Tal block.

In a previous summary, the petroleum ministry had proposed spending of $400 million by fertiliser companies on laying a 1,000km pipeline to get supplies from dedicated sources and the amount would be adjusted against GIDC.

According to the revised plan, gas distribution companies – Sui Northern Gas Pipelines Limited (SNGPL) and Sui Southern Gas Company (SSGC) – will claim 17.5% return on the pipeline supplying gas to the fertiliser companies along with a toll.

Fertiliser firms will slap penalties on the state-owned gas utilities if the committed gas supply is diverted to other consumers, the plan says. Gas utilities will also be bound to give guarantees to ensure supplies to the fertiliser plants in gas sales agreements and gas transmission agreements.

According to the plan, SNGPL and SSGC will use their main supply lines to transmit gas to the dedicated plants after some quick investments in looping and enhancing capacity at different points.

The gas utilities will only charge a toll for this service, which will be determined by the Oil and Gas Regulatory Authority (Ogra) as per third party access rules framed for import of liquefied natural gas (LNG).

A consortium of fertiliser plants will ink formal gas sales agreements with gas producers on ‘take or pay’ basis. The consortium will also enter into gas transportation agreements with the gas utilities for the transmission of gas through existing main lines from the agreed point of entry to the designated point of delivery under Third Party Access Rules 2011 and pay a toll as determined by Ogra.

The investment required for augmenting the capacity of main lines will be made by the utility companies as they will be entitled to a rate of return on their investment as well as the toll to be charged from the consortium.

The ECC sub-committee comprises adviser to the prime minister on petroleum and natural resources, ministers for law and information, deputy chairman of Planning Commission and water and power secretary with the task to review the plan for gas supply to fertiliser firms from dedicated sources.

According to sources, the sub-committee was required to develop modalities for legal arrangements to execute a long-term project, determine mechanism for involving the private sector, review long-term gas sales agreements, develop formula for financing the project and determine a better cost-effective structure including gas from other sources as well as imports.

Published in The Express Tribune, December 9^th, 2012.