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Fertiliser units to buy gas from producers

August 19, 2012

ISLAMABAD, Aug 18: Fertiliser companies have heaved a sigh of relief on a government decision to ensure dedicated gas supply to fertiliser plants on SNGPL network by allowing them to buy the fuel directly from the gas producers.

Fertiliser Manufacturers of Pakistan Advisory Council (FMPAC), a representative body of fertiliser companies, appreciated the decision as currently four fertiliser plants on Sui Northern Gas Pipelines Limited (SNGPL) system have been suspended gas supply to divert gas to power sector.

The petroleum ministry had proposed to the Economic Coordination Committee (ECC) that in the wake of gas shortfall, fertiliser plants be allowed to negotiate gas supply arrangements directly with gas producers.

In a summary presented to the ECC, the petroleum ministry stated that various meetings with stakeholders, including representatives of the four plants, have taken place and after detailed deliberations it has been established that one of the workable proposition is to allocate equivalent quantities/volumes from some alternate gas supply source by dismantling respective GSAs of fertiliser plants with the SNGPL.

Since all existing gas producing fields have already been allocated either directly to consumers in some cases or to gas utility companies in most of cases, it would not be possible to allocate gas from such gas fields, the petroleum ministry said. However, upcoming gas from existing fields or new discoveries may be dedicated for fertiliser sector especially, the four fertiliser plants presently on SNGPL system.

The ECC has decided in principle to approve the summary to provide gas to fertiliser plants from the source from where additional gas is available.

However, the concept of supply of gas to power sector as first priority would not change.

The petroleum ministry will submit another comprehensive plan for allocation of 256mmcfd gas to fertiliser plants to the ECC.

The Energy Conference 2010 had pointed out that fertiliser plants on Mari Gas Company Limited (MGCL) system are getting uninterrupted supplies with approximately 12 per cent curtailment, Fauji Fertiliser (Bin Qasim) connected with Sui Southern Gas Company Limited (SSGCL) system is also getting uninterrupted gas supply with around 20 per cent curtailment.

The ECC in its recent meeting passed a summary that will allow the SNGPL-based fertiliser plants to buy gas directly from wellhead to reduce burden on gas distribution companies and to ensure that they get gas without further curtailments.

Shahab Khawaja, Executive Director of FMPAC, urged the president and the prime minister to immediately restore gas supply to the SNGPL-based fertiliser plants which are on the verge of collapse.

Shahab said that FMPAC also supports government decision of imposing infrastructure development cess on gas usage for all sectors of economy, especially, fertiliser plants as a necessary tool to develop long term solution to energy crisis in the country. He said around 200 industrial units have gone to courts and obtained stay against imposition of cess and on the other hand the fertiliser Industry has been paying cess and shall continue to do so in the larger interest of economy.

He said that there are ways to solve the crisis especially for fertiliser sector as there are several low BTU gas fields which are not in use and can be dedicated for fertiliser plants which would not only reduce burden from SNGPL network but would also save billions of rupees of subsidy government has to offer on imported urea.

The SNGPL-based fertiliser plants are facing permanent closures as out of first seven months of 2012, SNGPL-based plants received gas for two months only.

He said that fertiliser sector is the only sector which is facing complete closure while CNG, industries and power sector are getting gas.

He said that if the government resumes gas supply to SNGPL based fertiliser plants, a substantial reduction in the domestic urea prices can be observed which would benefit poor farmers and ensure timely and proper usage of urea for better crop production. Farmers are facing Rs53 billion of burden each year due to high urea prices in the country.

He said that natural gas is the only raw material for fertiliser plants while other sectors use it for generating cheap electricity, hence the government should prioritize the fertiliser sector as it supports country’s agriculture sector and ensures food security in the country.