The Ministry of Petroleum and Natural Resources has decided to transport raw gas from Latif Well through a transmission line to Sawan plant, official sources told Business Recorder here on Tuesday. Latif Petroleum Concession Agreement (PCA) was signed on October 23, 2003 under Petroleum Policy 2001. Gas discovery in the field was made in March 2007 by Latif Joint Venture (OMV 33.4%, PPL 33.3% ENI 33.3%).
Currently around 50 mmcfd Latif gas is being processed at Kadanwari plant. The Kadanwari plant has a processing capacity of 232 mmcfd to deliver 200 mmcfd processed gas. At present, this capacity is being utilised to cater to the processing needs of raw gas from Kadanwari, Miano and Latif fields. The Kadanwari Joint Venture (ENI 18.42%, PKP 15.79%, KUFPEC 15.79% and OGDCL 50%) has tested higher gas production rates establishing additional flow potential from the field. With additional gas becoming available from Kadanwari field, production from Latif field will have to be choked back to 25 mmcfd as per agreement between Kadanwari joint venture and Latif JV because of Kadanwari plant capacity limitations.
The Petroleum Ministry is of the view that if new avenues to process raw gas from Latif field are not found the gas network will lose additional gas to the tune of 50-70 mmcfd. To continue producing gas from Latif field as per current projections, an option of taking Latif gas to nearby Sawan plant has been explored. This requires laying of about 50 kms new pipeline from Latif field to Sawan plant where surplus capacity is available that can be used for processing Latif gas.
Section 2.1.6 (iv) of the Petroleum Policy 2001 applicable to the Latif PCA provides that delivery point for sale of pipeline specification gas shall be the nearest transmission system for which the producer is required to built a tie-in pipeline connecting the field to the delivery point at the transmission system and for which, the producer is entitled to receive transmission tariff at the rate as approved by the concerned regulator. Further, section 2.1.6(v) of the policy provides that the request of the producer, the buyer nominated by GoP for purchase of gas can also consider laying of such pipeline from field gate to the nearest transmission system at its own cost. In such a case, the delivery point will be the field gate and transportation tariff payable to the buyer will be determined by the concerned regulator. The policy also provides that producer will be required to confirm the requisite gas supply volumes, pressure, reserves and other technical parameters on standard supply term contract basis for a period of not less than 15 years.
The policy provisions do not envisage construction of pipeline between the field gate and nearby gas processing facility by either a third party or the buyer. Under normal circumstances, such pipelines are treated as part of gathering facilities and are thus responsibility of the producers. However, Latif JV has categorically declined to make additional investment on construction of pipeline connecting Latif field to Sawan plant or to put up a new processing plant due to: (i) Latif JV has already made substantial investment connecting Latif field to Kadanwari plant; and (ii) additional investment on new pipeline from Latif field to Sawan plant is not economically feasible due to low gas price (presently, capped at $2.64/mmbtu) as allowed under Petroleum Policy 2001.
Latif JV has, however, expressed its commitment for exploring additional volume of gas within shortest possible period through further development activities if issue of connecting Latif field to Sawan plant is amicably resolved.
Presently, there is acute shortage of gas on SNGPL/SSGCL system and to enhance gas availability, it is necessary to make best use of all available resources. Accordingly, SSGCL and SNGPL have held lengthy negotiations with Latif JV to find a way forward to produce additional gas from Latif field. As a result of these discussions, SNGPL/SSGCL have proposed to buy raw gas at Latif field gate and take it to Sawan plant for processing thus designating the pipeline network from Latif field to Sawan plant as transmission pipeline. Latif JV has shown willingness to give a price discount to SSGCL and SNGPL equivalent to the processing charges payable to Sawan plant owners. In other words the cost of pipeline is to be borne by the utility companies.
Considering widening gap between supply and demand on the utility network, Petroleum Ministry said that it is imperative that the gas utility companies (SNGPL/SSGCL) be allowed to accept Latif gas into the system by laying 50 kms pipeline, with the following modalities; (a) SSGC/SNGPL will buy raw gas from Latif field at field gate from Latif JV; (b) to transport raw gas from Latif field, SNGPL and SSGCL will jointly lay and own 50 kms long pipeline from Latif field gate to Sawan plant which will include pig launcher, receiver and cathodic protection system etc. Latif JV shall provide pump skid for injection of inhibitors along with provision of inhibitor (a chemical to protect against corrosion) for protection of the pipeline against acidic nature of CO2/H2S;(c) Latif JV will construct sludge catcher and measurement facilities upstream Sawan plant for measurement of raw Latif gas going into Sawan plant while Sawan JV will install measurement skid at outer flange of Sawan plant to meter specification gas delivered to SSGCL and SNGPL; (d) SSGCL and SNGPL will recover purification charges of raw Latif gas from Latif JV which shall be adjusted against the notified price of specification gas; (e) pipeline shall be owned by SNGPL and SSGCL having 50% equal share by both the utility companies;(f) the total estimated cost of 50 Kms, pipeline is estimated as Rs 2.308 billion by SNGPL which shall be equally shared between SNGPL and SSGCL; (g) the regulator will allow this expenditure as admissible for determination of revenue requirements of the Utility Companies and so will become part of consumer gas price and; (h) in view of urgency in import of required pipeline by SNGPL, PNSC would issue NOC for shipment of 50,000 meters of steel pipeline from Xinjiang Port China to Karachi Port through COSCO vessels in case PNSC vessel is not available at the time of material readiness, as requested by SNGPL.
The sources said, Petroleum Ministry has two options under the given situation which are as follows; (i) Let Latif JV to operate under its normal conditions and produce 25 mmcfd gas as per commitment and based on available processing capacity of Kadanwari by foregoing opportunity of having additional gas in accordance with production profile at para-2 above.
In such a case, we will have to import additional furnace oil at very high cost to abridge gas demand supply gap; or (ii) as a special case, government may allow the gas utility companies to proceed further in accordance with the proposal. According to sources, the project shall be executed on fast track basis to facilitate injection of additional gas into the system. SNGPL/SSGCL will make every possible effort to complete this project prior to winter of 2012. Economic analysis of the project as carried out by SNGPL indicates that present value of economic gains accruing because of accelerated recovery of the reserves as per option-ii is $242 million higher than as compared to option-i. The findings thus support the execution of project on fast track basis.
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