ISLAMABAD, March 19: The World Bank has asked Pakistan to dismantle gas price agreement (GPA) of Mari Gas Company Limited (MGCL), a move that would increase fertilizer and electricity rates manifold.

A senior government official told Dawn that this was being contemplated as a second phase of gas price rationalization programme. Part one of the programme agreed to with the WB under $350 million structural adjustment credit (SAC) has recently been implemented by dismantling GPA of Pakistan Petroleum Limited (PPL).

“A financial restructuring plan for MGCL ought to be developed to provide a capital base consistent with the company’s potential. Simultaneously, a framework should be developed to dismantle the GPA contingent on the upfront financial restructuring of the company to be approved by all share-holders. Consistently with the above, the applicable wellhead price should be gradually increased so that it ultimately reflects the value of the commodity,” said a World Bank directive as part of SAC.

The Mari Gas for fertilizer feed stock is capped at Rs9.75 per million cubic feet (MCFT) against Rs34 per mcft from Sui Northern and Sui Southern gas companies. The gas price for power production from MGCL is also lower than gas coming from other sources. Against Rs125.05 per mcft from Mari, gas price for power production from Sui System before dismantling of PPL’s GPA was Rs158 per mcft.

The Mari field is the largest gasfield now in Pakistan with about 6-7 trillion cubic feet (TCF) of remaining recoverable gas reserves. In addition, the field holds much more promise than this.

The field is primarily supplying gas to three large fertilizer plants in close vicinity and to 1600-MW Guddu Thermal Power Station. Under the 2001 fertilizer policy, Mari Shallow has been earmarked for fertilizer industry and Mari Deep for power generation.

MGCL is owned 40 per cent by Fauji Foundation of Pakistan Army, 20 per cent each by the federal government and Oil and Gas Development Company Limited and 20 per cent by the public through the stock exchange.