The Ministry of Law, Justice and Human Rights has backed a proposal that calls for providing gas from Mari field to Engro’s new fertiliser plant at a concessionary rate, a significant development that will clear the way for approval of the facility by the Economic Coordination Committee (ECC).
The ministry’s opinion came following an observation by the ECC, in a meeting held on January 8, that the matter of gas supply at a discount should be referred to the Law, Justice and Human Rights Division, sources say.
The division would determine whether the agreement signed between Engro and Sui Northern Gas Pipelines Limited (SNGPL) and the judgment of Sindh High Court required the government to supply gas to Engro in accordance with specified terms and conditions.
The Ministry of Petroleum, in a summary sent to the ECC, said a detailed reference had been sent to the Law Division, seeking its opinion on two specific questions.
First, whether the shifting of gas sales agreement (GSA) for Engro’s old plant to SNGPL to enable it to meet contractual commitment to Engro’s new plant is legally tenable. Second, whether the proposal for extending the concessionary pricing period by the number of days during which gas could not be supplied to the plant is workable. The Law Division replied in the affirmative.
After that, according to sources, the petroleum ministry sent a slightly amended proposal to the ECC, saying it understood that the term “existing terms and conditions”, used in the ECC decision, pertained to Engro’s existing GSA with SNGPL and that sale price for feedstock gas would be $0.70 per million British thermal units (mmbtu) as provided in the agreement.
It suggested that since SNGPL had not been able to supply the contracted volumes of gas to Engro, the 10-year concessionary price facility could be extended by the number of days during which gas could not be supplied to the Engro plant.
Earlier on November 13 last year, the ECC considered a summary, suggesting supply of gas to Engro’s new plant at Deharki at a concessionary rate of 70 cents per mmbtu.
It 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 SNGPL.
During the tenure of the previous PPP-led government, it had been decided to divert 103 million cubic feet of gas per day (mmcfd) from Engro’s old fertiliser plant, connected to Mari gas field, to its new Enven plant, but there was no agreement on reducing the rate to 70 cents from $3.3 per mmbtu.
Enven 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 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.
Published in The Express Tribune, January 23rd, 2014.
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