KARACHI, Jan 17: There is no consensus, but most people at the country's capital market worry that a prolonged disruption of gas from Sui would eventually have a negative impact on several sectors of the economy.
A research team at Capital One Equities Limited mentioned in their morning report of Monday that the gas purification plant of Pakistan Petroleum Limited (PPL) that was damaged, would require several days before it could resume production, and that could put brakes on the growing economy.
Analysts at KASB believed that within the power sector the brunt of the blow would have to be borne by Karachi Electric Supply Corporation (KESC) and power plants of Wapda, to which gas is being supplied by SSGC and SNGPL.
"Since the profitability of the two gas utilities is linked to their asset base, the shutdown of Sui gas field is unlikely to have any major impact on their profitability," reckoned KASB.
Capital One analysts admitted to an adverse impact on the power sector, stating that thermal electricity contributes 63 per cent of the total electricity produced in the country, out of which about 52 per cent was generated on gas.
As the power plants are facing acute gas shortage, most of the dual-fuelled power plants, including Kot Addu Power Company (Kapco) and Rousch Power, are operating on alternative fuel, that is, HSD and fuel oil.
"As per our initial estimates, producing one kilowatt hour (KWH) of electricity on furnace oil and HSD, respectively, cost 120 per cent and 265 per cent higher than producing the same unit of electricity on gas," said the analysts and added that if the gas shortage persisted for a considerable period, cost of producing electricity would skyrocket and put extra financial burden on Wapda.
In respect of the fertilizer sector, Capital One calculated that Fauji Fertilizer and Engro Chemicals were unlikely to be main victims of gas supply disruption from Sui since the main supplier gas for feedstock and fuel to those two was from the Marigas field.
But two listed fertilizer units and Pak Arab Fertilizer were likely to take a brunt to the tune of Rs900 million to Rs1 billion in revenues, if the gas purification plant remained closed for a month.
The analysts feared that if the unsavoury situation persisted and 50 per cent of the total electricity generation on gas was switched to furnace oil or HSD, the government would have to bear an additional bill of $57 per month for the import of furnace oil, whereas additional HSD import would cost another $100 million per month.
Market watchers believe that impact on the textile sector due to shutdown in gas supplies in Sindh will not be more than 10 per cent, but textile units in Punjab will be the major sufferers.
"Companies would be able to meet their future shipment commitments as per schedule, as every company normally maintains a standby arrangement from Wapda," observed Capital One.
Traditionally, companies also maintain a diesel backup, yet it would be unavoidable to stave off dent to company earnings that would arise from higher electricity and fuel charges.