Fertiliser plants on SNGPL network: no deal on resumption of gas supply
November 14, 2012
The Ministry of Petroleum and Natural Resources and fertilisers firms on Tuesday failed to reach an agreement on the resumption of gas supply to fertiliser plants from the Sui-Northern Gas Pipelines (SNGPL) network. A meeting, held here with Dr Asim Hussain, the Prime Minister””s Advisor on Petroleum, in the chair, which discussed various options for resuming the gas supply to the fertiliser sector.
A senior industry official, who attended the meeting, told Business Recorder: “We have discussed different plans with officials of the Petroleum Ministry, including provision of $400 million from receipts of the Gas Infrastructure Development Cess (GIDC) to fertiliser firms for the construction of 1,000-kilometre-long gas pipeline for utilisation of low BTU gas to subsidise the building and laying of gas transmission lines”.
The GIDC is a tax imposed on gas consumers, to generate funds for gas pipelines and LNG import projects, Iran-Pakistan gas pipeline and Turkmenistan-Afghanistan-Pakistan-India gas pipeline projects. The plan will help save fertiliser plants from the impact of load shedding; they will now receive gas supply directly from various gas fields, without relying on gas utilities.
A Petroleum Ministry official said that the move to lay the gas pipeline by spending revenue generated via GIDC had created a controversy, as other gas consuming sectors opposed the move, saying that GIDC was imposed on gas consumers to fund gas pipeline projects of national importance, following US opposition to the Iran-Pakistan gas pipeline project. Other stakeholders are of the view that utilisation of funds collected through GIDC are meant to finance LNG import projects, and the Turkmenistan-Afghanistan-Pakistan-India gas pipeline project.
The Petroleum Ministry official said that the Economic Co-ordination Committee (ECC) of the Cabinet, in its meeting held on August 16 this year, had approved the Petroleum Ministry””s proposal to allocate gas from existing or new discoveries for the fertiliser sector, especially the four fertiliser plants on the Sui Northern Gas Pipelines (SNGPL) system.
“The fertiliser industry has projected a cost of $300-400 million, for the pipeline to be laid by gas utilities (SNGPL and Sui Southern Gas Company Limited),” a source in the fertiliser industry said, adding that the operating and maintenance cost of the pipeline will be recovered from gas consumers. The Oil and Gas Regulatory Authority (Ogra) will require an amendment in rules to allow the income on account of operating and maintenance costs.
At present, as progress on these projects remains sluggish. The Ministry of Petroleum has, however, now agreed to a proposal put forth by the fertiliser industry; calling for funds for a transmission and distribution network from dedicated sources of gas. Fertiliser firms have supported the plan, which will divert gas to their plants from dedicated fields controlled by the Oil and Gas Development Company (OGDC), Mari Gas and MOL Pakistan. Under the plan, the Petroleum Ministry has proposed to dedicate supply of 202 Million Cubic Feet Gas per Day (MMCFD) to the fertiliser industry.
According to the plan, the Oil and Gas Development Company (OGDC) was to dedicate 130mmcfd gas from the Kunnar Pasakhi Deep field; 15mmcfd from OGDC””s new Bahu field; 10mmcfd from OGDC””s new Reti Maru field; 22mmcfd is to be provided by the Mari Gas Company; and 25mmcfd will be diverted from MOL””s Makori East Tal Block.
“Investment made by the fertiliser plants will be adjusted against recoveries of the Gas Infrastructure Development Cess (GIDC),” he said. Industry sources said that the entire transmission system – including compression and allied facilities – will be set up by the four fertiliser plants on the SNGPL system. These plants include Engro Fertilisers, PakArab Fertiliser, Agritech and Dawood Hercules Fertilisers.