Gas curtailment crisis: SNGPL-based fertiliser plants face Rs 5.5 billion revenue loss

All SNGPL based plants that include Agritech, DH Fertilisers, Pakarab and Engro's new plant faced a collective loss of Rs 5.5 billion in terms of revenue in first half of year 2012, as the total urea sales by SNGPL based plants stood at 150,000 tons, 166,000 tons less than 316,000 tons urea sold in first half of 2011 showing a decline of 52 percent and revenue loss of Rs 5.5 billion.
The total urea production by SNGPL based plants in first half of 2011 stood at 297,000 tons which declined by 33 percent to 198,000 tons in first half of 2012. SNGPL based plants are only operated at 18 percent of their capacity in 1H 2012 versus 25 percent last year, said fertiliser sector sources here on Wednesday.
During 1H 2012 SNGPL based fertiliser plants faced an estimated gas curtailment of 82 percent in which Agritech and Pak Arab got gas for 63 days each while Engro Enven and DH Fertilisers got gas for 33 days of operations in first 6 months of 2012. In first quarter of year 2012 all SNGPL based plants that include Agritech, DH Fertilisers, Pakarab, Engro's new plant as well as SSGC based FFBL faced a loss of revenue by 53 percent compared with 1Q of 2011, generating Rs 8.16 billion revenue in 1Q 2012 compared to last years' Rs 17.29 billion rupees. In 2012, SNGPL based four plants as well as SSGC based FFBL lost profitability by 125 percent and made a collective loss of Rs 1.076 billion, whereas the same plants had made profit of Rs 4.3 billion in first quarter of 2011.
According to a fertiliser sector official, SNGPL based plants are facing the worst-ever crisis of their history as 82 percent gas curtailment was never witnessed before 2012. He said that despite making an investment of US $2.3 billion in last 4 years on new production capacity, making Pakistan world's 7th largest urea manufacturer country is sitting on an idle urea capacity of over 3.0 million tons.
Fertiliser sector official said that if the same gas curtailment continues during remaining 5 months of 2012, the SNGPL based fertiliser plants would be forced to shut down permanently resulting laying off highly skilled manpower, in addition to huge burden on Government of Pakistan exchequer, in shape of importing urea to meet the urea shortfall.
Fertiliser sector sources further said that it's not just fertiliser plants that will face the burnt, the whole farmers' community as well as the government would be the ultimate losers if fertiliser plants with over 2 million tons of capacity are shutdown. He said that government needs to support fertiliser industry to ensure cheap local urea to farmers and import fuel for the power sector and the industry which is more cost effective.