The government has dedicated 75 Million Cubic Feet daily (MMCFD) gas to power sector from already discovered gas reservoirs in Khyber Pakhtunkhwa (KP) by settling local issues and connecting it with main pipeline on emergency basis, it is learnt. According to reliable sources in the Petroleum Ministry, the government has finalised a plan to dedicate up to 160 MMCFD more gas to power houses from Oil and Gas Development Company Limited's (OGDCL) reservoirs within next few months.
To finalise the plan a high level meeting was held here on Wednesday, which was attended by senior Petroleum Ministry officials as well as OGDCL officials. Sources further added that OGDCL is soon to enhance its current gas production by 250 MMCFD from one Billion Cubic Feet a day (BCFD) to 1.25 BCFD, up to 50 MMCFD of the additional gas would be dedicated to fertilizer sector and 40 MMCFD to industrial sector.
The power sector is utilising a total of 850MMCFD of gas out of total production of 4.3BCFD. Moreover, an estimated 500 mmcfd gas would be brought into the system by the other gas/oil Exploration and Production (E&P) companies including Pakistan Petroleum Limited (PPL), Mari Petroleum Company Limited (MPCL) and others. "We are of the firm belief that by the end of September the country's local gas production would increase by around 750-800. The Ministry has directed all the E&P companies to speed up their exploration activities and has also directed gas utilities to bring the discovered gas into the system on fast track basis", a Petroleum Ministry official said.
The government recently diverted 150MMCFD gas to four Lahore based private power houses to produce 800 Megawatts of electricity. According to sources the curtailment of gas supply to the four fertilizer plants based on the system of Sui-Northern Gas Pipelines Limited (SNGPL) which faced over 300 days of gas curtailment in 2012 has led to importation of nearly one million tons of urea at a total cost of $450 million.
Four plants based on SNGPL including Pakarab, Dawood Hercules Fertilizer, Agritech and Engro Fertilizer's new plant, faced around 90 percent gas curtailment in 2012 that significantly brought down urea production- to 4.2 million tons against 4.8 million tons produced in 2011. Pakistan currently has the capacity to produce 6.9 million tons of urea. The SNGPL-based fertilizer plants were completely shut for 4 months due to serious gas shortage in winter. At present the government is rotationally supplying gas to these plants. Currently only 2 of these plants are operating at 75 percent capacity with two days a week supply only.
The country was forced to spend $1.5 billion on the import of urea owing to gas suspension to fertilizer plants during the past three years. Moreover to provide urea at affordable price to farmers the government has already provided a subsidy of around Rs 80 billion on import of 3.4 million tons of urea in the past three years. According to market sources, the benefits of subsidy is not reaching the growers and most of the imported urea is also being sold at domestic urea prices, which is some Rs 100 per bag higher than the imported urea price.
Imported Urea costs approximately Rs 46,400- 46,500 per ton (including import price, taxes and other charges) as against government's fixed price of Rs 32,000 per ton, resulting in some Rs 14,400-14,500 per ton subsidy. According to Fertilizer Manufacturers Pakistan Advisory Council (FMPAC) Pakistan is self-sufficient in urea production and with consistent gas supply to these plants, government can ensure timely availability of this key farm input to growers at the cost effective rates and would also help reduce its fiscal deficits as well as subsidy.