SNGPL cuts gas supply to urea plants


Sui Northern Gas Pipelines Limited (SNGPL) has once again suspended gas supply to the country’s largest urea manufacturing plant, Engro Fertiliser’s new plant, for an indefinite period, Profit learnt. Industry leaders are expecting that suspension of gas supply to fertiliser plants will drastically increase urea prices in the country, which are already hovering at a 32-year high. Sources indicated that another fertiliser manufacturer, Pak Arab, Multan, was also expecting gas supply suspension in couple of days. In order to fulfill urea demand for Rabi season, government ensured uninterrupted gas supply to fertiliser plants during December, on 17th November and asked industry to reduce fertiliser prices by Rs100 per bag.
Meanwhile, the federal cabinet decision was based on increased demand for gas in winter and pressure exerted by powerful lobbies that had been rallying for gas even though they have gas agreements for nine months only. Engro’s EnVen has been completely shut down for the eleventh time this year by SNGPL. Increased gas supply had brought market prices down from Rs1,800 to Rs1,550 which saved farmers Rs250 per bag. However recent curtailment of gas to fertiliser plants will burden farmers with a loss of approximately Rs11-15 billion in Rabi due to expected price hike by hoarders and dealers. In terms of available urea stocks, opening inventory was 200,000 tonnes on 30th November. However, total demand for urea in December is 900,000 tonnes and as imports are expected to be delayed coupled with a halt in local manufacturing, we shall be faced with a shortage of 300,000 – 450, 000 tonnes in December.
On the basis of a sovereign commitment of 100mmcfd, Engro set up the world’s largest single train ammonia-urea plant in Daharki, which has a production capacity of 3850 tonnes per day (1.3 million tonnes per annum), the largest amongst all manufacturing plants. Engro Fertiliser’s new urea plant, which has sat idle for 158 days following its construction due to gas curtailment, would have helped to end the country’s urea deficit. This would also have helped minimise the country’s foreign exchange outflow/loss considerably and helped national exchequer save funds as imported urea is costly and hurts the domestic industry. SNGPL’s action is contrary to government’s directive to ensure gas supply to the fertiliser sector in Rabi. Sindh High Court has also passed a judgment to supply continuous gas to EnVen as per contract based on sovereign guarantee and article 158. Shutdown of Engro’s plant is contrary to this judgment as well