Plan to stop gas supply to power, cement units: New fuel policy prepared
By Our Staff Reporter
ISLAMABAD, May 1: The government has decided not to provide gas to the cement sector in future and divert additional gas supplies away from Wapda, KESC and independent power producers (IPPs) after 2011, owing to gas shortfalls.
This is part of the new fuel policy approved by Prime Minister Shaukat Aziz a few days ago. The policy will be formally announced soon to enable investors to make their plans accordingly, a senior official of the petroleum ministry told Dawn.
As a result, the government will now give top priority to develop power plants based on hydel, coal and nuclear resources to meet energy requirements of a growing economy.
Moreover, if the gas import plans cannot be implemented and gas supplies remain limited to LNG imports in the next five years, the new thermal power plants will be based on furnace oil with the provision that these could be switched over to gas at a later stage. This will, however, put additional foreign exchange burden on the import of fuel.
The policy has also clearly defined the order of priority for all sectors for additional gas supplies. The policy has been prepared on the basis of an integrated analysis of Wapda and KESC systems, scheduled development of hydel, coal and nuclear energy projects and expected low water availability during dry period.
The economic analysis of various competing fuels indicate that natural gas and LNG will cost $6 per mmbtu (million British thermal unit) against the current rate of about $3.5 per mmbtu, while fuel oil will cost $8.1 per mmbtu. The cost of Naptha and high-speed diesel has been estimated at $1.4 and $12.6 per mmbtu.
As such, domestic and commercial consumers will get top priority for gas supplies, followed by fertiliser and related industrial consumption.
Third priority has been given to IPPs and the power plants of Wapda and KESC already having firm gas supply commitments under the gas supply agreements while CNG-stations, captive power for export oriented textile units and general industrial sector have been placed at the fourth priority.
The 5th preference will be given to Wapda and KESC’s power plants other than those with existing firm commitments. The last priority has been given to the cement sector, which means that gas will not be provided to this sector in future.
The policy envisages that after meeting existing supply commitments and other priority sectors, natural gas for new IPPs will not be available after 2011.
This situation will remain intact even after materialisation of 500 MMCFD (Million cubic feet per day) liquefied natural gas (LNG) import by 2010 and hence additional supplies would be diverted to other priority sectors. Further, the gas supplies to Wapda and KESC plants above the existing commitments will also be diverted to other sectors after 2010.
Moreover, CNG stations, captive power and general industrial sector will start running short of gas from fiscal year 2015.
