Two fertiliser plants to get indigenous gas

The government has formed a body to allocate indigenous gas to two fertiliser plants, namely Fatima Fertiliser Company Limited (FFCL) and Agritech Limited, to produce urea locally in order to reduce reliance on imports.

The two fertiliser plants did not previously have allocation of indigenous gas and had, therefore, been running on LNG when the government demanded increased production of urea to meet local demand.

The government had been providing LNG at discounted rates to the two fertiliser plants to cut the cost of urea production, however, the country has been facing a shortage of LNG due to unavailability of product in the international market in wake of the Russia-Ukraine war. Sources say that the matter of allocating indigenous gas to these fertiliser plants was tabled in a recent meeting of the Economic Coordination Committee (ECC) of the Cabinet.

Earlier, the Ministry of National Food Security and Research had submitted a summary regarding “Urea fertiliser requirement for calendar year 2023.” The ECC directed that a committee be constituted under the chairmanship of former prime minister Shahid Khaqan Abbasi to determine viable options of providing indigenous gas to the said fertiliser plants.

The committee will be comprised of the minister of state for petroleum and secretaries of the Petroleum Division, Power Division, Ministry of Industries and Production, and the Ministry of National Food Security and Research.

The committee will deliberate on the issue of supply of indigenous system gas to the two plants and submit viable recommendations thereon for ECC’s consideration.

In July last year, the cabinet discussed the issue of supplying domestic gas to fertiliser plants, however, due to opposition from the cabinet members, the matter was referred to the Cabinet Committee on Energy (CCoE) for further consideration.

The Petroleum Division had proposed that 68mmcfd gas be allocated from the Mari (Shallow) Gas Reservoir to M/S FFCL. Mari Petroleum Company Limited (MPCL) was operating the Mari Development and Production Lease/Mari gas field located in district Ghotki, Sindh. MPCL produces an average of about 750mmcfd gas, 695mmcfd from shallow reservoirs and 55mmcfd from deep reservoirs.

The ECC initially approved the allocation of up to 60mmcfd gas from MPCL’s field (shallow reservoir) to the Thermal Power Station Guddu (TPSG), which was subsequently revised to 110mmcfd with additional allocation of 50mmcfd following the ECC’s decision in December 2016. Total gas allocations from Kandhkot and Mari fields to TPSG stand at 360mmcfd.

FFCL and Agritech, with urea production capacity of 79,000mt/month, had been operating on 10mmcfd subsidised RLNG last year at the price of Rs839/mmbtu against the actual average cost of RLNG at $15/mmbtu (Rs2,925/mmbtu) during FY22.

The Petroleum Division submitted a proposal to the cabinet to allocate 68mmcfd of the total 110mmcfd of TPSG/GENCO-II to FFCL on a firm basis. The proposed 68mmcfd gas includes 50mmcfd being utilised by Sui Northern Gas Limited (SNGPL) on an as-and-when-available basis.

While the Finance Division and Ministry of Industries and Production also supported the proposal, the Ministry of Planning, Development and Special Initiatives did not. The Power Division proposed allocating the gas on an as-and-when-available basis and withdraw the take-or-pay clause from MPCL’s pending Term Sheet of 110mmcfd gas supply with GENCO-II.

The committee is now consulting with the provinces on the matter.