New govt to divert gas from fertilizer plants to IPPs

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New govt to divert gas from fertilizer plants to IPPs

Lahore - The new government of the Pakistan Muslim League-Nawaz will divert gas supply from fertilizer plants to power sector as a short-term solution to lessen electricity loadshedding in the country especially in Punjab as the province has been experiencing worse power breakdowns and industries have been suffering the most.


However, statistics do not allow such diversion for now at least, as 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 experts said on Tuesday.   “With PML-N taking lead in elections 2013 and expectedly prioritizing energy needs, and summers going to be full on, gas diversion from fertilizer sector to power sector is a must,” experts from AHL observed in a report. 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.

It is to be noted 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, analysts expect that Engro and FFBL to remain 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). However, though gas flows from the above-mentioned companies are not sufficient to be shared with the power sector, partial gas curtailment of FFC and Fatima cannot be completely ruled out in the near future.

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. In this regard, they rule out any possibility of major gas curtailment with respect to the aforementioned companies, however, partial or rotational curtailment could be possible but for a short period of time.

Courtesy:  Nation

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