ISLAMABAD: Fauji Foundation has urged the government to declare "must run" on dedicated gas fields aimed at utilizing their availability at maximum potential.
This concession has been sought by Chief Executive Officer (COE)/ Managing Director Fauji Foundation in a letter to the Minister for Petroleum and Power, Omar Ayub.
CEO Fauji Foundation emphasised that Fauji Foundation, through its investments, generate profits to render health and education services to the wards of retired soldiers. The welfare services are dependent on guaranteed/ timely projects.
CEO Fauji Foundation raised cash flow issue of Foundation Power Company Daharki Ltd. FPCDL being a project of Fauji Foundation, equity of which was raised through approval of ECC on April 22, 2008. The loan will retire by June 2023 for which payment is made through the dividend @ $ 9 million per annum. He requested that Capacity Power Purchase (CPP) payments are made on a timely basis to FPCDL to meet obligation.
The Minister was further informed that FPCDL has huge payables gas bills of Mari Petroleum Company Ltd(MPCL) amounting to Rs 10.53 billion including delayed mark-up amounting to Rs 2.87 billion) as of June 15, 2020. It is an operational risk and any default situation will affect the project with consequences for the welfare portfolio of Fauji Foundation. It was requested to reduce Energy Purchase Price (EPP) receivables by at least 70 per cent and maintain such equilibrium in future.
CEO Fauji Foundation recommended that a favourable decision be considered to address the concerns of Fauji Foundation because of its unique position, different from any other commercial entity.
The sources said, Central Power Purchasing Agency Guaranteed (CPPA-G) has paid some amount on this account.
CEO Fauji Foundation maintained that EPP tariff of FPCDL has been adversely affected by the increase in gas prices by the government as well as levying GIDC and GDS on the gas price. FPCDL used to be among the top ten IPPs and has slided down to 22 position in the latest merit order issued by NTDC on June 8, 2020 as gas price which was 281.88 per MMBTU in 2011 has been increased to Rs 924 per MMBTU in 2019-20, showing a raise of 228 per cent. The rate of gas & feed rose from Rs 48.3/ MMBTU to 264.15( 447 per cent increase, GDS from Rs 233.58 to Rs 559.85( 140 per cent increase, GIDC Rs 100/ MMBTU and Energy Purchase Price from Rs 2.1806/ kWh to Rs 7.148/ kWh ( 228 per cent.
According to the CEO Fauji Foundation, FPCDL is using a low BTU gas ( 65 MMSCFD) supplied by MPCL, dedicated to its project and guaranteed for 25 years. Leaving of GDS and GIDC increases the cost of EPP and as a result the tariff.
He was of the view that the advantages of cheap indigenous gas is not being passed on to the consumers. The portion of government levies in the gas price i.e. GIDC and GDS are 11 per cent and 59 per cent respectively which constitutes 70 per cent( Rs 5/ kWh) of the price.
"Should FPCDL be absolved from these levies, EPP( including FC and VOM) shall decline from Rs 7.7585 / kWh to Rs 2.7549/ kWh. This will save Rs 6.66 billion per annum to CPPA-G at average annual generation of 1,329 Gwh ( 90 per cent availability) and the effect will directly pass to consumers," he continued.
Fauji Foundation further stated that the non-use/ reduced use of the available indigenous gas of the country not only makes the wells redundant but adversely impacts on the revenues/ investments of MPCL( in which GoP also has a stake). Besides it is a denial of cheap electricity which is produced in an environmentally friendly manner.
Fauji Foundation has recommended that the government should objectively review its policy by absolving the GDS/ GIDC and / or review of its rate for those gas wells developed exclusively for a project and not for the system of SSGCL/ SNGPL or of any other domestic use.
It has further recommended that as RLNG prices have declined as a result of reduction or oil prices in the international market natural gas prices may also be reduced to bring parity as per the regulatory mechanism otherwise the country's indigenous resources will suffer.
"Power plants having a dedicated gas field like FPCDL should ideally be exempted from the merit order requirement and be considered as " must run" to utilize their availability at maximum potential," he continued.
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