Innovative programme: PPL plans power plant with gas supply from its field

Could sell electricity to private sector in order to avoid circular debt.


Zafar Bhutta July 18, 2014

ISLAMABAD:


Pakistan Petroleum Limited (PPL), a state-owned oil and gas explorer, has framed a plan to venture into power production and set up a 50-megawatt plant that will run on gas being produced by the company in an exploration block in Sindh, officials say.


PPL, with 50% working interest in Gambat South block in Sanghar district, Sindh, has discovered gas in Wafiq X-1 and Shahdad X-1 wells in the area. Both wells are going through a testing phase during which 30 to 60 million cubic feet of gas per day (mmcfd) is expected to be produced.



In an effort to fast-track production of gas from the fields, the company sought allocation of 18 mmcfd from Wafiq X-1 for the 50MW power plant, said officials while talking to The Express Tribune.

Giving a detailed plan of the project, PPL suggested that the power plant was in parallel to the setting up of gas processing facilities for sale of gas to distribution companies during the testing phase.

According to officials, the establishment of the power project will require special purpose production equipment on operating lease and the electricity generated will be supplied to Shahdadpur grid, just about 10 km from the site of the well. PPL would be responsible for providing fuel-quality gas for the plant, they said.

Following the testing phase, PPL may review the possibility of continuing power generation and setting up a permanent combined-cycle power plant keeping in view the potential of existing discoveries to produce up to 64 mmcfd of gas for four to six years.

“Success of the project will encourage other exploration and production companies to follow suit and establish power plants,” an official remarked.

With the assumption that PPL would get approval of power tariff in the range of 9 to 12 cents per unit from Nepra, the operating lease of power generation equipment is a more viable option that will lead to low-cost electricity production and early flow of earnings from discovered gas with fast payback of investment.

While circular debt risks could be avoided by selling electricity to private purchasers like industrial zones, K-Electric and others, an arrangement through the National Transmission and Dispatch Company (NTDC) including advance payments via letters of credit could also be incorporated in the power purchase agreement in order to avert default, they said.

Officials said the Ministry of Petroleum and Natural Resources would seek approval of the Economic Coordination Committee (ECC) to allow PPL to run its power plant on lease during the well testing phase and later consider the possibility of developing an independent power plant.

Keeping in the current power outages, the ministry will also ask the ECC to allocate 18 mmcfd of gas for PPL’s power plant subject to approval of the Ministry of Water and Power.

Published in The Express Tribune, July 19th, 2014.

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