Fertiliser sector to invest $100m in gas fields

LAHORE: Fertiliser manufacturers have come up with a long-term plan to invest $100 million in the development of dedicated lower British thermal unit gas fields – which can ensure sustainable supplies of raw material (feedstock) for urea manufacturing process, said Shahab Khawaja, executive director of Fertilizer Manufacturers Pakistan Advisory Council (FMPAC) on Wednesday

The Sui Northern Gas Pipelines Limited (SNGPL)-based fertiliser plants will invest $100 million for the development of the fields, which will ensure better gas supply to fertiliser plants to get better production from local plants instead of spending millions of dollars on costly imported urea.

The fertiliser sector is deprived of gas since April 2010 and one of the worst affected sectors of the economy. The resultant shortage and high prices of urea have been damaging the rural economy over the last few years.

The SNGPL-based plants – being large scale units – are now at the verge of closure with over 100 billions of rupees of payable bank loans. The long-term arrangement is a win-win situation for all stakeholders since fertiliser plants upon receiving the regular gas from different small fields will provide farmers with cheaper local urea and gas companies will be selling gas to customers at low rates, he said.

Khawajz said that with the new arrangement SNGPL-based fertiliser plants would receive gas from various small gas fields.

He added that gas utilities had to provide fertiliser plants with gas as per the legal agreements.

He said that the decision to supply gas to fertiliser industry through dedicated small fields was in line with the strategy to lessen burden from the SNGPL network and ensure continuous supply to general and industrial consumers in the country.

This decision has been taken at relevant forum of the government after detailed deliberations from all the concerned stakeholders in the larger interest of the country, which is an agriculture economy.

Agriculture contributes around 24 percent to gross domestic product of Pakistan and it also provides raw materials to all the major industries of Pakistan – that include textile and sugar.

He said that successful implementation of the plan would lead to self sufficiency in fertiliser production and save half a billion dollar foreign exchange and Rs20 billion in subsidies given on one million tons of urea import.

The arrangement is beneficial for both the Sui companies since it will save 240 million million standard cubic feet per day of gas allocated to four fertiliser plants under existing gas sales agreements with SNGPL.

He said that fertiliser plants would also pay a higher gas price than the gas price available to them under the existing GSAs, and would 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 fertiliser industry, gas was diverted from fertiliser companies to other sectors.

However, with the implementation of this arrangement, certainty of gas supplies to the fertiliser sector would be ensured, he believed.