‘Gas policy violations’
Reference to the lead editorial published in Business Recorder on June 06, 2018 titled ‘Gas policy violations’. While discussing a whole range of Government decisions the Editorial included criticism of a commercial transaction involving MPCL and Pakarab which has positive implications for the country’s overall economy and National Food Security.
It needs to be understood that the Gas Allocation and Management Policy 2005 assigned second priority to Fertilizer sector after domestic consumers. However, in pursuance of the decision taken during Energy Conference 2010, fertilizer plants at Mari and SSGCL network were subjected to 12-20% curtailment causing hardship to the Manufacturers and the farming community. These measures led to large scale import of Fertilizer at enormous burden to the national economy.
It is important to highlight that since 2011, the Government of Pakistan has spent approximately USD 1,785 million on the imports of 4.4 million metric tonnes of urea and concurrently paid out a subsidy worth PKR 85 billion.
The referred gas allocation came about as a result of PFL and MPCL’s engagement since 2012 seeking dedicated supply of gas from MPCL’s fields that could not immediately be added to the pipeline due to low specs. PFL signed an MOU with MPCL on February 20, 2018 to off-take 75 MMCFD gases at applicable wellhead gas price under Petroleum Policy 2012 in response to offer letter from MPCL January 26, 2018. PFL undertook to install its processing facility and put in place gas transmission arrangement for delivery of the said volumes to its plant in Multan. PFL has also agreed to contribute 40% of Mari internal pipeline cost. The dedicated supply of 75 mmcfd gas would help PFL to restart the operations of its closed fertilizer plant. This would also reduce the Country’s reliance on costly imported fertilizers and enhance contributions to the Government exchequer in the form of taxes. It would provide MPCL with the ideal solution to its available gas resources.
It needs to be reemphasized that this allocation makes it possible to utilize very low-quality gas of Mari deep having high concentration of 45% Co2 as against less than 5% Co2 in most of gas field in Pakistan and should be lauded. PFL also undertakes to incur the cost of approx US$ 70 Million for installation of gas processing plant, compression facility and construction of 25 km pipeline required from point of delivery of Mari field gate up to SNGPL injection point. These gases after treatment were to be transported by SNGPL through its system against which PFL would pay tolling charges. The allocation of 75 mmcfd low BTU gases to PFL are equivalent to 50 mmcfd of Spec Gases which merely meet PFL’s plant operational needs. (Allocation of 62 mmcfd of Spec gas). PFL was the only client to accept terms of MPCL and willing to invest US$ 70 million.
It is emphatically reiterated that no bidding was done for natural gas supply from MPCL to Engro under Fertilizer Policy 2001 for 10 years. Furthermore, allocation of SML/SUL to Engro was also not subject to any bidding whereas allocation of gas to PFL is to be priced at Rs 508/mmbtu under Petroleum Policy 2012.
If Pakistan is to meet its Food Security goals the Government (and media) should be encouraging private sector investment in developing and supporting sources of Agricultural input like Fertilizer. Unfortunately, this Editorial damages the cause of strengthening our rural economy, which should be our national goal.
Karachi Aftab Ahmed
