Feeling the pressure resulting from intense lobbying of influential business groups, demanding maximum share of natural gas for their uninterrupted operations from the dwindling supplies – that are expected to increase over 2 billion cubic feet per day (bcfd) – the government has decided to convene a meeting of all stakeholders to finalise gas load management plan for the upcoming winter season on November 1.
Avoiding controversy
An official source said the decision was made to avoid controversy over gas load management plan, as the government has decided in principle to implement the agreements with different consumers in letter and spirit. “We are facing a lot of pressure from industrial, power and fertiliser sectors”. The Ministry of Petroleum had earlier drafted a gas load management plan which sought to cut natural gas supply to the industrial sector for a period of three months, from December to February to meet the rise in demand of domestic consumers. “Intense lobbying was made against the plan and we are left with no option but to bring all stakeholders together in front of the media to decide on the final plan as per their recommendations.”
Demand side management
The source said that the demand side management will be very difficult in coming winters and if the government did not take a firm stand on curtailing the gas supplies the entire system might choke, as the gas transmission network especially in Punjab is working under extremely tight conditions. The power sector is demanding gas as its first right for power generation, while 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.
Immense pressure
The government is under immense pressure from the CNG and fertiliser sectors for equitable load management. 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 as compared to other sectors. The government is in no position to increase the load shedding for the CNG sector as they could launch a protest campaign. More than 3.5 million vehicles ply on CNG in the country. It also helps in an annual saving of $2.6 billion by the lowing of the petroleum imports by 3.8 billion litres per annum. CNG association claims that the two days load shedding in Punjab alone causes an additional burden of Rs42 billion per annum on the consumers.
Addressing bottlenecks
Considering the precarious gas supply situation, he said, we have no option left other than to implement the gas supply to various consumers as per their agreement. For the last two years, the influential industrial consumers were getting supply for a full year as against their agreements of 9 months gas supply. They could use alternate fuels for their requirements during the winter season. The industrial sector uses approximately 750 mmcfd of gas. 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).
Value addition of industrial sector
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 natural gas to GDP through the transportation sector is insignificant.
