Showing commitment of prioritising energy sector, the new government of the Pakistan Muslim League-Nawaz has diverted gas supply from fertilizer of mainly Punjab-based plants to power sector as a short-term solution to lessen electricity loadshedding, easing miseries of the masses to some extent, it was learnt.
Industry sources informed The Nation the SNGPL has suspended gas supply to four fertilizer units including Pakarab, Engro, Agritech and Daud Hercules Fertilisers to entertain the most efficient independent power producing plants to reduce electricity crunch, as the new government has reined in to favour public instead of working for the interest of few groups.
As per statistics, the current total shortfall of gas for power sector stands at around 500mmcfd/day while total availability for fertilizer sector (excluding the SNGPL network) stands at about 492mmcfd/day, industry sources said. “With PML-N controlling the power and prioritizing energy needs, and summers going to be full on, gas diversion from fertilizer sector to power sector is a must,” they observed. They are of the view that since new set-up’s priority would be to resolve the long-prevailing energy crises, they see diversion of gas from fertilizer plants to the power sector as being one of short-term solutions available to the new government.
Sources said that urea production at all fertiliser plants on Sui Northern Gas Pipelines Limited (SNGPL) network has come to a halt following the gas supply diversion to power units.
They said that fertilizer sector remained dull during CY12 due to various problems, mainly gas unavailability or curtailment. However, with the commencement of CY13, the profitability of the sector surged (FFC, FFBL, Engro 1QCY13 profit after tax up 192 per cent YoY), mainly owing to better urea offtake (1QCY13 up 30 per cent YoY) on account of better gas availability (especially for Engro and FFBL that faced shortages).
Unless the long-term gas pipeline plan for fertilizer plants is in place (expected by mid 2014), gas diversion seems a far cry with respect to current scenario. Any diversion of gas to power sector can only be possible by diverting portion of the gas available to the fertilizer sector of around 492mmcfd/day. In this case, Engro and FFBL are on the safe side, as the aforementioned companies are already facing gas curtailment (ENGRO promised 200mmcfd/day, available 103mmcfd/day, FFBL promised 85mmcfd/day, available 54mmcfd/day).
Industry experts further said that there are other ways available by which the new government can manage the current as well as upcoming shortfall (summers, and then winter season). These included gas curtailment on rotational basis or importing more furnace oil for the power sector at least for the short term.
However, fertilizer industry representatives argued that agri sector is entering into Kharif 2013 and this closure will result in higher urea supply-demand gap across the country. They claimed that fertiliser sector has been worst-hit sector in terms of gas supply; in 2012 the sector operated at a mere 13 per cent of its installed capacity. During 2013, post winter shutdown of 4 months, fertiliser plants on SNGPL received average gas at 2 days a week with frequent shutdowns.
and presently no fertiliser plant is getting gas in the peak season.
Due to this gas curtailment, despite having sufficient production capacity, the country is importing urea to meet its domestic needs. Urea imports in last 3 years remained 3.4 million tons with foreign exchange component of $1.5 billion, while over Rs 85 billion subsidies have also been paid on imported commodity.