Urea makers plan $300m investment to ensure gas
KARACHI: A consortium of Engro Fertilisers Ltd (EFL), Fatima Fertilisers and Fauji Fertilisers will invest over $300 million in the Gas Pressure Enhancement Facilities (GPEF) project at the Mari network to ensure the availability of gas for domestic urea production and safeguard the food security.
“Our expected share in capital expenditure in this project is over $100m, Engro Fertilisers Chief Financial Officer Ali Rathore informed a media workshop on Thursday.
He pointed out that even though Pakistan has the fifth highest urea consumption in the world, it is not investing in capacity growth despite a rapid surge in population. To encourage further capacity expansion by fertiliser manufacturers, there is a dire need to introduce a consistent and homogeneous policy for gas pricing for the industry.
He said that setting up a large-scale globally competitive fertiliser plant requires multi-billion dollar investments. Removing anomalies in gas pricing will encourage manufacturers to undertake significant investments in plant modernisation and expansion while improving the efficiency to yield optimal utilisation of allocated gas.
By removing discriminatory gas pricing among fertiliser manufacturers, the government can facilitate new investments and promote efficiency to ensure sufficient urea availability for the farmers.
Mr Ali said the removal of subsidies for fertiliser manufacturers on the Sui Southern Gas Company (SSGC) and Sui Northern Gas Pipeline Ltd (SNGPL) networks, which represent 60pc of all fertiliser manufacturing capacity, was a step in the right direction.
While gas prices for SSGC and SNGPL networks have increased by around 200pc, the manufacturers on the Mari network (FFC and Fatima) are still receiving gas at the subsidised price of Rs580 per mmBtu. “This discriminatory gas pricing in the industry has led to multiple prices in the market and will not help the government achieve its fiscal objectives,” he pointed out.
The urea price of Fauji Fertiliser Bin Qasim and Engro Fertilisers is Rs5,489 and Rs4,649 per bag as compared to Rs4,139 and Rs3,767 before the gas price hike. However, the urea bag price of Fauji Fertiliser Company (FFC) and Fatima Fertiliser is unchanged at Rs3,767.
He said this price discrepancy has created an opportunity for the middlemen. A homogenous gas price will create a level-playing field for all fertiliser manufacturers in terms of input costs and help stabilise urea prices in the country, Ali added.
Published in Dawn, March 8th, 2024
