Crisis averted: SSGC resumes gas supply to KESC

Power utility to pay 30% over regular payments to clear outstanding dues.

Saad Hasan May 28, 2013
220 million cubic feet per day of gas will be provided by SSGC to KESC after an understanding was reached. CREATIVE COMMONS

KARACHI: Karachi has been spared a protracted spell of debilitating power cuts, after gas supply to its power utility was restored on the assurance that dues payable to the Sui Southern Gas Company (SSGC) would be cleared, officials said on Tuesday. 

All prickly issues between the Karachi Electric Supply Company (KESC) and SSGC were settled in a meeting late Monday night, held under supervision of Sindh Governor Ishratul Ibad. The meeting was called after some parts of the port city suffered through up to 10 hours of power outages.

“KESC is now being supplied 220 million cubic feet per day (mmcfd) of gas. This will help ease the power crisis,” Zuhair Siddiqui, the managing director of SSGC, said. “In return, they will clear outstanding payments.”

The power utility owes billions of rupees to SSGC for gas consumed but never paid for. Since KESC is itself struggling to recover its dues from the government (for electricity sold to state-run institutions), it is facing difficulty clearing its liabilities.

“It has been agreed that KESC will pay us 30% over the normal payments for purchase of gas,” said Siddiqui. “This means that, for every Rs100 worth of gas we sell to them, we will receive Rs130.”

The additional payments will increase SSGC’s cash flows by Rs1.25 billion a month, he said. For more than a year, KESC has been paying its monthly gas bill regularly, albeit while ignoring past dues.

However, a thorny issue remains to be solved: what will the KESC do about the Rs17-18 billion it has incurred as interest charges on late payments?

A nationwide shortage of gas has not spared the SSGC’s system either. Against a demand of 1,350mmcfd, SSGC supplies around 1,150mmcfd.

“The shortages in the system are being managed by cutting gas to CNG and industries. We don’t have any other choice,” Siddiqui said.

The increase in gas supply to KESC came at the cost of a reduction in supply to other installations in the province, including the Guddu and Jamshoro power plants. “These power plants could run on furnace oil,” Siddiqui said, defending his company’s decision. He also denied speculation that gas produced in Sindh was being diverted to Punjab.

“From time to time, SSGC and SNGPL share supplies whenever the need arises. Since the Qadirpur field has been out of operation for a few days, we had given them a bit of our share. It is nothing unusual,” he clarified.

Resource addition

Around 60mmcfd of gas will be added to the SSGC system within the next five months after supplies commence from the Rehman, Zarghun and Kunnar Pasakhi Deep fields.

On the prospects of LNG imports, Siddiqui said the next government will have to take the major decisions. “The county needs LNG. That is the only short-term solution,” he said.

An earlier plan to import LNG – which can be converted to gaseous form and pumped into SSGC’s pipelines to cover shortfalls – has been held up in court. “Even if the government has a team of strong lawyers, this problem won’t be solved. Some decisions need to be taken,” SSGC MD said, without elaborating as to what he was referring to exactly.

Published in The Express Tribune, May 29th, 2013.

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