Another gas shortage crisis on the horizon for Pakistanis

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Islamabad: (Parliament Times) In addition to water crisis, a severe gas crisis is also on the horizon in Pakistan. While the former is attributed to policy of inaction under political compulsions, the latter is attributed to poor vision of Mushararf Government which decided to promote CNG stations for short term gains and the unfortunate geopolitical environments in the region that have restrained implementation of TAPI and Iran Pakistan Pipeline. The policy of burning gas as cheep fuel has led to a situation, where the sectors adding value to the natural gas with no substitute raw material will suffer and the have ultimate negative impact on economy and food security. The demand and supply situation of gas has been changed from affluence to deficiency and after 2006 the country has entered into the deficiency phase. The natural gas proven reserves of Pakistan at the end of 2012 were 22.7 trillion cubic feet (0.6 trillion cubic meters) with reserve to production ratio is 15.511 (R/P ratio). This ratio shows that the reserve would last for approximately 16 years more, if they are used at current rate of production. Pakistan’s home-grown natural gas reserves are declining. If current gas scenario prevails, Pakistan would bear gas shortfall of 8 Bcfd by the year 2025-26.
Although Pakistan has been blessed with natural gas reserves, “Sui Gas”, the largest natural gas field located at Sui, Balochistan but years of mismanagement, lack of strategic vision, limited investments in energy sector and inadequate exploration of these gas reserves have led to shortage of natural gas in Pakistan. This prime energy source is to be distributed among five critical sectors i.e. households, commercial, industry, power, transport.
In the recent past the LNG marketing has influence the minds of policy makers to the worst. Instead of working on adding natural gas, they have opted to lethargic option of imported LNG as an alternate to natural gas. Many analysts are not able to perceive the gravity of this situation, as they are projecting that LNG is bringing a positive change in Pakistan’s energy-equation. The reality is that; although the high-priced imported LNGmight be fulfilling the national demand for gas, but unfortunately, it is not promising any long-term benefits due to its high prices for the industrial sector on the whole and fertilizer sector in particular.
It is important to clarify this misperception at the earliest, so that the experts can begin searching for a more sustainable solution to the gas supply challenge faced by the urea-producers.Domestic fertilizer manufacturers are playing an important role in ensuring food security, while also saving precious foreign exchange.This large-scale has invested heavily to fully meet the national demand for fertilizers. Moreover, it is one of the biggest contributors of tax-revenues to the national exchequer and also provides employment opportunities to Pakistan’s work-force.
Supply of imported LNG at high prices and the insufficient distribution of local gas, is already hurting this important industry, whereby the smaller producers are already on the verge of collapse. Some factories have been totally deprived of the indigenous gas supply. So, they are being forced to operate on expensive RLNG, to avert degradation of plant and machinery, due to idleness and somehow retain their highly skilled work-force. The price mechanism for fertilizer sector as per Fertilizer Policy envisages availability of natural gas as feed stock at the rates prevalent in Middle East to ensure availability of fertilizer at prices lower than international market. However imposition of GIDC has led to an average price of 4.88 USD per MMBTU against the international average of 2-3 Dollars. Such high cost of production will ultimately hamper the use of costly fertlizers and lower growth. The RLNG with exorbitant prices does not make any economic sense for fertilizer production.
Fertilizer companies are not only producing an essential agricultural input like fertilizers domestically, to significantly reduce imports and save precious foreign exchange for the country. It is also creating robust revenue streams for the government of Pakistan, by contributing billions of rupees every year. When it comes to paying all the due taxes on time, fertilizer companies are raising the standards for corporate and financial performance, for other progressive organizations in Pakistan to follow.
Fertilizers are strategically one of the most important industries for an agrarian economy like Pakistan. If the government shows indecisiveness towards creating consistent subsidy policy or a favorable regulatory environment for the agriculture sector and keeps ignoring the advice of the farmer’s community, fertilizer experts and learned associations are of the opinion that this essential sector will continue to suffer.
Fertilizer plants such as PFL, FF, and Agritech who are working with SNGPL, have experienced frequent shutdowns on account of availability or affordability of gas. These plants have not operated at all during 2018 and also remained out of operation for almost eight months during 2017, thus negatively impacting the nation’s revenue and production which has resulted in huge financial losses to these companies. The higher price of RLNG offered instead of natural gas is not financially viable option for production of urea in particular under the prevailing price mechanism. The minimum essential affordability level should enable the above mentioned companies to keep the capital intensive plants in operation, retain skilled manpower and maintain their presence in the market, if the gas is provided in a sustained manner.
A special tariff for Feedstock gas can also be developed for plants operating on RLNG. The government can implement a formula for mixed-billing, based on domestic gas price and RLNG rate,Thus, reducing the burden of gas cost on the fertilizer industry, by following the same method as applied to the power sector in Pakistan.This is a practical, long-term solution to resolve the energy crisis inthe fertilizer industry.

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