Fertilizer sector to invest $100m to develop BTU gas sources

The SNGPL based fertilizer plants would invest $ 100 million for long-term development of dedicated lower btu gas fields that would ensure better gas supply to plants for better local production instead of depending on costly imported urea worth hundreds of millions of dollars.
The fertilizer sector has been deprived of gas since April 2010 and has been one of the worst affected sectors, in turn affecting the rural economy over the last few years.
According to Shahab Khawaja, executive director, Fertilizer Manufacturers Pakistan Advisory Council (FMPAC), new gas allocation through long-term arrangement is just a replacement of current allocation through which fertilizer plants based on SNGPL network will get gas through different small fields as a replacement of gas which would be discontinued from existing sources and which is their legal right as all fertilizer companies have agreements in place(gas sales purchase agreement- GSPA) with the utility providers.
He said the decision was meant to supply gas to fertilizer industry through dedicated small fields in line with the strategy to reduce burden from the SNGPL network, and to ensure continuous supply to general and industrial consumers in the country. This decision has been taken after detailed deliberations from all concerned stakeholders in the larger interest of the country which is an agriculture economy, he added.
Agriculture contributes around 24% to the GDP of Pakistan and it also provides raw materials to all the major industries of Pakistan including, textiles and sugar. He said successful implementation of the long-term plan will ensure self sufficiency of the country in fertilizer production and would also bring substantial savings, half a billion dollars of foreign exchange annually and subsidy of approximately Rs 20 billion that the country has to spend on 1 million tonne of urea imports. He said post the ECC approval, GSAs between gas fields and fertilizer plants were inked carrying reservoir risks and gas transportation agreements with both Sui companies and were signed under OGRA’s TPA Rules, adding that these agreements strictly comply with the TPA rules.
The arrangement is beneficial for Sui companies with additional stream of tolling income and saving 240 mmscfd of gas allocated to four fertilizer plants under existing GSAs with SNGPL. While dispelling the impression that fertilizer sector would get dedicated gas from different small fields without any additional investment, he said to facilitate this transaction, fertilizer plants are investing more than $100 million in increasing pipeline capacities of Sui companies where bottlenecks exist.
The SNGPL based plants being large-scale units are now at the verge of closure with over 100 billions rupees of payable bank loans. The current arrangement is a win-win for all stakeholders as fertilizer plants upon receiving regular gas from different small fields would provide farmers with cheaper local urea and gas companies would be selling this gas to new customers at better rates.
He said fertilizer plants will also pay a higher gas price than the gas price available to them under the existing GSAs, and will also have to incur significant additional investment for the smooth transportation of gas from respective gas fields to their plants. In the past despite guaranteed contracts with the fertilizer industry, gas was diverted from fertilizer companies to other sectors, however, with the implementation of this arrangement, certainty of gas supplies to the fertilizer sector would be ensured to get continuous urea production for Pakistani agriculture sector.