With the gas shortage expected to increase over 2 billion cubic feet per day (bcfd) during winters, the Petroleum Ministry has convened a meeting of all the stake holders to finalise the gas load management plan today.
Draft load management plan
An official source said the Petroleum Ministry had drafted a gas load management plan which recommended gas supply to various sectors as per their agreements. Industrial sector was likely to be the most affected sector of the new plan, as they were getting gas supply for the whole year for the last two years instead of 9 month agreements. Under their agreements the industrial sector gas supplies have to be cut for three month period from December to February to meet the rise in demand of the domestic consumers.
Allocative efficiency
To lessen the demand for gas, the government is also considering a proposal to increase gas prices to the level of electricity tariff. Then the industrial sector will have no need to pressurise the authorities for getting 750 mmcfd gas supply which they mainly utilise for power generation. The demand side management will be very difficult in coming winters and the entire system could choke as the gas transmission network in Punjab is working under extremely tight conditions, the source said.
Power sector
Power sector is demanding gas as its first right for power generation. The stoppage of gas supply to four IPPs is estimated to put an additional burden of Rs125 billion on the consumers, as the power plants were using costly diesel for power generation. Industrial sector is lobbying for gas to maintain its exports growth, which is a bonanza for the government in the form of increased export earnings without any other external inflows from donors. CNG and fertiliser sectors are also putting pressure for equitable load management across the board.
CNG sector
The government is in no position to increase the load shedding for the CNG sector as they could launch a protest campaign. CNG sector uses 7 per cent share in the gas supply while the general industries utilised 29 per cent. Fertiliser sector has been claiming that it was subject to 55 per cent gas curtailment as against 40 per cent or less curtailment to other sectors. The source said considering the precarious gas supply situation, there is no option left other than to implement in letter and spirit agreements with the consumers.
According to an official study on economic value of natural gas, the contribution of natural gas, in terms of GDP output, is highest in the power sector. This, coupled with the high cost of the alternative fuel, implies that the power sector should be given higher priority for gas supply. Within the power sector, the economic value of natural gas is higher when it is used to replace high speed diesel (HSD) in comparison to furnace oil (FO).
Economic value
The value addition of the industrial sector is the second highest. However, the economic value of gas in the industrial sector in comparison to other sectors is comparatively lower due to the lower cost of alternatives. Thus, gas for heating and boiler usage should be supplied only to those industries which are either non-switchable or have highly efficient processes, such as co-generation. It says the value addition in fertiliser sector is relatively low in comparison to the power and industrial sectors. However, the economic value of natural gas is high for existing plants and therefore, the supply of gas to these plants should be continued. Additional urea demand should be met through the import of urea instead of allocating gas to new plants. The economic value of gas in the transportation sector is high, but the contribution of the natural gas to GDP through the transportation sector is insignificant.
