Engro’s new plant: Finance ministry agrees on gas supply at a discount

Company is seeking 103 mmcfd of gas at the rate of 70 cents.

ISLAMABAD: The Ministry of Finance has backed a proposal, floated by the Ministry of Petroleum and Natural Resources, which calls for providing gas from Mari gas field to Engro’s new fertiliser plant at a concessionary rate.

“We have received comments from the finance ministry, which has supported the proposal of providing gas to Engro’s new plant at a discount. Ogra is yet to give its point of view,” said a petroleum ministry official who was aware of the development.

Earlier, the Economic Coordination Committee (ECC), in a meeting held on November 13, considered a summary suggesting supply of gas to Engro’s new plant at Deharki at a concessionary rate of 70 cents per million British thermal units (mmbtu).



The ECC did not take any decision and asked the petroleum ministry to first seek comments from other ministries including the finance ministry and from stakeholders like the Oil and Gas Regulatory Authority (Ogra), Mari Gas Company and Sui Northern Gas Pipelines Limited (SNGPL).

“The ECC will reconsider the proposal after receiving comments from the stakeholders,” the official said

The previous PPP-led government had decided to divert 103 million cubic feet of gas per day (mmcfd) from Engro’s old fertiliser plant, connected to the Mari gas field, to its new Enven plant, but did not agree on reducing the rate to 70 cents from $3.3 per mmbtu.

The Enven plant, located in Deharki, Sindh, is the world’s largest single-train, ammonia-urea plant with a production capacity of 1.3 million tons per annum.

Engro, the foods and fertiliser giant, has been getting 103 mmcfd from the Mari field at $3.3 per mmbtu, but it is asking SNGPL to apply the concessionary rate in line with a contract with the utility to secure gas supply from Qadirpur gas field at 70 cents.

Sources said participants of the November 13 meeting told the ECC that SNGPL had been unable to provide gas to the Enven plant because of the demand-supply gap. Apart from this, Mari Gas Company has reduced the delivery of gas to Engro’s old plant by 12% for supply to power plants.



However, they drew the ECC’s attention to its approval of a Ministry of Industries’ proposal in August this year, which said supply from Mari Gas to Engro’s existing plant be reallocated to SNGPL for meeting the needs of Engro’s new plant on a dedicated basis. This arrangement must be in line with Engro’s contract with SNGPL with all terms and conditions staying unchanged including concessionary pricing for the gas at actual feed consumption, it said.

It was proposed in the ECC meeting that since SNGPL had not been able to provide the contracted volume of gas, a provision should be made for the concessionary price for a period of 10 years as per the gas sales agreement between Engro and SNGPL.

Published in The Express Tribune, December 7^th, 2013.

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