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Depleting gas reserves spell disaster for fertiliser industry

Updated October 22, 2018

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.— Reuters/File
.— Reuters/File

ECONOMIC experts consider fertiliser consumption a direct indicator of growth in the agriculture sector. Pakistan has a flourishing fertiliser industry, which has been growing at approximately 8.5 per cent per annum.

More than 14 factories are manufacturing urea, calcium ammonium nitrate, ammonium phosphate and nitro phosphate, with each one of them having a direct impact on soil fertility. Urea is considered the highest-grade fertiliser and is useful for all types of crops. In particular, wheat crop consumes the largest part of the farm nutrient.

The fertiliser industry is facing an uncertain future as indigenous reserves of natural gas, the basic raw material for manufacturing urea, are depleting fast. The government has been subjecting fertiliser units to gas loadshedding in winters for two reasons: a lack of required gas pressure and to provide domestic consumers of gas with relief.

Imported RLNG is costlier in winter when its demand as raw material for urea production is high

The Mari gas field in Ghotki district is supplying 535 million cubic feet gas per day (mmcfd) to three units of Fauji Fertiliser Company, two units of Engro Fertilisers and one unit of Fatima Fertiliser Company. Located within a radius of around 60 kilometres, these units are manufacturing 90pc or 5.2m tonnes of the country’s total production of 6.2m tonnes.

Engro Fertilizers Senior Vice President Asif Tajik fears that the Mari gas reserves, dedicated to the fertiliser units, may go dry within six to eight years. They have already gone down from six trillion cubic feet to 2tr cubic feet.

The claim should set alarm bells ringing for stakeholders of the agriculture sector. If not taken care of immediately, the gas shortage may threaten national food security as experts believe our over-cropped fields may not give optimal yields without the use of fertilisers.

Underlining the importance of urea in reaping higher yields, Mr Tajik said that half of the world population will go hungry in the absence of the compost.

Dr Javed Ahmed, who serves as director for wheat at the Ayub Agriculture Research Institute (AARI) in Faisalabad, says wheat production in the country will drop by at least 50pc in the absence of urea treatment.

Referring to the federal government’s recent statement about changing the focus of the China-Pakistan Economic Corridor (CPEC) from infrastructure to agriculture and job creation, he says the country can feed its neighbours only if it is able to enhance its farm production by improving fertiliser intake.

But the million-dollar question is how to maintain smooth supplies of gas to the urea-producing units when existing indigenous reserves are rapidly exhausting and the discovery of new ones does not seem likely through conventional exploration.

One of the available options is the import of Re-gasified Liquefied Natural Gas (RLNG), although its fluctuating prices pose a problem. Having been clubbed with the world oil prices, RLNG will be cheaper in summer and costlier in winter when it is in great demand as raw material for urea production. In the case of RLNG, Mr Tajik says the government will have to subsidise the industry for keeping urea affordable for farmers.

Another option is getting gas from Iran, which has already built a pipeline up to our border for the purpose. But fearing trade sanctions by Washington, Islamabad is reluctant to buy gas from Tehran. There is also the Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline project. However, this option is too unreliable for want of peace in the war-torn Afghanistan.

Yet another solution is exploring unconventional sources of natural gas, gas reserves. But a senior official of the Oil and Gas Development Company (OGDC) cautions that unconventional gas finds are more difficult to develop and costlier to produce. Their discovery will require new technologies and improved skills because it needs directional drilling, unlike vertical drilling done for the natural gas reserves.

Mr Tajik says it is up to the government whether it wants to invest on the exploration of gas reserves or subsidise the import of the raw material for keeping the local fertiliser industry running. Otherwise, it has to import farm nutrients and provide the local farming community with them at subsidised rates. The current per-tonne price of urea in the world market is $280. About 100,000 tonnes of it is already being imported to meet the shortage for the 2018-19 Rabi season caused by the closure of fertiliser units for want of feed gas.

Published in Dawn, The Business and Finance Weekly, October 22nd, 2018