Row over allocation of gas to Engro plant: ECC constitutes another committee
December 24, 2012
Economic Co-ordination Committee (ECC) of the Cabinet, has constituted another committee now under the chairmanship of Minister of State for Commerce Abbas Khan Afridi to resolve a dispute between Petroleum and Water and Power Ministries over allocation of gas to Engro fertiliser plant, well informed sources told Business Recorder.
Representatives of both the warring Ministries are also on the committee which has been directed to complete the task prior to next ECC meeting.
Petroleum Ministry apprised the ECC in its meeting on December 18, 2012 that the government on October 23, 2012 approved, in principle, the proposal of the Ministry of Petroleum and Natural Resources for allocation of around 202 mmcfd gas to the four SNGPL network based plants from existing fields or new discoveries through a dedicated transmission system.
Gas fields identified for the purpose included KPD, Mari, RetiMaru, Bahu and Makori(Tal block).
The ECC constituted a committee headed by the Advisor to Prime Minister on Petroleum and Natural Resources, Dr Asim Hussain to develop legal and commercial modalities under which the arrangement shall be implemented.
It was understood that post finalisation of all legal and commercial modalities, execution of the scheme would require 12-18 months after which the gas supply to the fertiliser plants will commence. Nevertheless, the Ministry of Petroleum is also cognisant of the current urea supply-demand situation in the country and is trying to ensure gas supply to the shutdown fertiliser plants to the maximum possible extent for increasing domestic production in an attempt to reduce imports.
It was also noted that out of the four SNGPL network plants, Engro’s plant is in a very close proximity of two fields, namely Mari and RetiMaru and while gas supply arrangements through the permanent scheme will take time, gas supply to Engro can commence immediately from Mari and within three or four months from the RetiMaru. In order to receive gas the beneficiary ie. Engro will lay their own line. Accordingly, Petroleum Ministry made the following recommendations; (a) to allocate gas from RetiMaru ( 11-13 mmcfd SNGPL equivalent), SARA West( around 60 mmcfd @125 BTUs=7-8 mmcfd SNGPL equivalent) and Mari new discovery ( 22 mmcfd SNGPL equivalent) to Engro in the interim period till the completion of permanent arrangements. Engro shall be able to utilise this additional supply to maximise its production from its new energy plant; (b) the arrangements required to have this gas consumed at Engro would not be in conflict with the permanent arrangement and gas, upon completion of transmission header, shall be injected in the main header without requiring any additional work; and (iii) the price of the gas shall be in accordance with the applicable petroleum policy.
During discussion in the ECC meeting, some of the members argued that Engro is being allocated gas at subsidised rates. Petroleum Ministry, however, observed that the proposal does not involve allocation of gas at subsidised rates rather it will be at actual cost basis.
Water and Power Ministry argued that, at present, power sector is the neediest sector in terms of gas from Mari field as electricity is being produced at present using costlier fuel. Distortions in provision of gas to various sectors of economy, especially the power sector, were also presented to the ECC.
Water and Power Ministry maintained that all sectors may be provided level playing field and like fertiliser sector, power sector may also be allowed to compete for the gas from discoveries.
Responding to Water and Power’s arguments, Petroleum Ministry, explained that Engro is willing to develop the field and lay additional pipelines whereas power sector is unable to utilise the full gas allocated to Guddu power plant at Kandhkot gas field. And if it wants to compete, they can negotiate with the Mari Gas Company Limited.
Water and Power Ministry however, suggested that the proposal should be deferred for some time and a committee may be constituted to consider the matter and make recommendations.