Three fertiliser plants: Pakistan govt allocates 222 MMCFD indigenous gas

ISLAMABAD: The federal government has decided to allocate 222 MMCFD indigenous gas to three fertiliser plants from the Ghazij/ Shawal reservoir (Mari Gas Field) at OGRA’s prescribed price aimed at keeping in urea or DAP prices at reasonable level, sources close to the Petroleum Minister told Business Recorder.

The decision was finalised by a committee headed by Deputy Prime Minister and Foreign Minister Senator Ishaq Dar before being placed for approval before the Economic Coordination Committee (ECC) of the Cabinet.

Mari Energies Limited (Mari Energies), operator of the Mari Gas Field located in Ghotki district, Sindh, produces gas from four vertically stacked reservoirs: Habib Rahi Limestone (HRL), Sui Upper/ Main Limestone (SUL/ SML), Ghazij/ Shawal, and Goru-B Deep.

Fertilizer manufacturers: Dar reviews suggestions for gas supply

In December 2016, the ECC authorised Mari Energies to divert unutilised volumes of HRL gas to existing consumers, with preference for the fertiliser sector. Since then, Mari Energies has supplied HRL gas originally allocated to GENCO-II (Guddu) to Engro Fertiliser’s base plant on the Mari network.

GENCO-II’s 110 MMCFD allocations from HRL have faced erratic off-take, while the agreed supply term expired in February 2020. As of June 30, 2025, Mari Energies has receivables of Rs 82 billion from GENCO-II, including Rs 16.1 billion in GDS, Rs 18.7 billion in take-or-pay claims, and Rs 47.2 billion in interest on late payments.

Most GENCO-II units have outlived their useful lives, and in 2021 the Cabinet Committee on Energy (CCoE) directed the Power Division to decommission inefficient plants in phases, except the 747MW CCPP, which is on the privatisation list. GENCO-II currently receives up to 150 MMCFD from Pakistan Petroleum Ltd’s Kandhkot field — sufficient for the 747MW unit — but the Power Division has confirmed it will only commit to firm off-take from Kandhkot going forward.

In 2018, to meet fertiliser demand, the Ministry of Industries and Production (MoI&P), with ECC approval, provided subsidised RLNG to Fatimafert Ltd and Agritech Ltd, with tariff differentials covered through government subsidies (Rs 33 billion in FY22 and Rs 41 billion for FY23-24). Both plants operated on subsidised RLNG until January 2023, after which they received indigenous gas from March to October 2023 at SNGPL’s prescribed tariff.

In November 2023, the ECC decided these plants would be supplied RLNG at indigenous gas tariffs, with the differential recovered from RLNG consumers as a cross-subsidy. OGRA allowed recovery at USD0.57/mmbtu in May 2024, but actual costs exceeded this, leading to delayed SNGPL payments to PSO and PLL.

Meanwhile, Fauji Fertilizer Company’s Bin Qasim plant (FFC-PQ) in Karachi, which produces both DAP and urea, has 68MMCFD allocated from SSGCL on an “as and when available” basis. Its Gas Supply Agreement with SSGCL expires in December 2025, requiring a fresh decision on post-expiry supply.

Apart from Fatimafert, Agritech, and FFC-PQ, the remaining seven fertiliser plants are already connected to Mari field under gas supply arrangements valid until 2029. These include Engro Enven (under a trilateral agreement with Mari Energies and SNGPL), three FFC plants, two Fatima Group plants, and Engro’s base plant.

To ensure affordable fertiliser production and reduce foreign exchange spending on imports, the Fertiliser Manufacturers of Pakistan Advisory Council (FMPAC) proposed indigenous gas allocation to the three excluded plants. After consultations with Mari Energies, it was agreed that these plants would be supplied from Mari’s Ghazij/ Shawal reservoir without disturbing existing allocations.

Currently, up to 48 MMCFD from Ghazij/ Shawal is being produced and allocated to SNGPL under extended well testing. The government’s fresh allocation of 222 MMCFD aims to secure urea and DAP supplies at stable prices while rationalising gas utilisation across the energy and fertilizer sectors.

Foregoing in view, Petroleum Division has proposed following arrangements for gas allocation and supply to fertiliser plants: Gas allocation from new Ghazij/ Shawal off-spec/raw gas discoveries may be considered in following manner:(i) (FFC Port Qasim), Karachi- 104 MMCFD raw gas/ 80 MMCFD processed gas supply;(ii) Fatimafert (Sheikhupura, 68 raw gas allocation/52 MMCFD process gas supply; (iii) Agritech(Daud Khel) 50 MMCFD raw gas allocation/ 38 MMCFD processed gas supply.

The raw gas from Ghazij/ Shawal will be delivered within Mari gas field (delivery point). The respective fertiliser customers shall install facilities for gas processing and compression, for injection and transportation of gas in Sui companies’ network to their respective plant sites.

The estimated investment to process low BTU gas with high CO2 content is estimated at over USD 200 million. The gas price at delivery point shall be equal to the applicable wellhead price as notified by OGRA from time to time.

The respective fertiliser customers shall enter into bilateral gas sale and purchase agreements (GSAs) with Mari Energies.

The respective fertiliser customers shall also enter into third party access arrangements with Sui companies for transportation of processed gas to their respective plant sites under Third Party Access (TPA) Rules, 2018 and the Pakistan Gas Network Code. In case of supply of gas to FFC (PQ), SNGPL and SSGC shall make gas swap arrangements as SSGCL network is not available around Mari gas field.

Up to 110 mmcfd gas from HRL allocated to GENCO-II is to be de-allocated. Up to 105 mmcfd be allocated to Engro Fertiliser’s base Plant on Mari. Out of the entire gas allocation of 105 mmcfd, the HRL gas volumes entitled to PP-2012 (over and above current allocation) gas price shall be priced as per the Petroleum Policy 2012 both for feed and fuel stock.

Mari Energies shall have the flexibility to supply any volume that becomes available from any of the above reservoir(s) to any of its customer(s) including SNGPL/ SSGCL, as “swing volume” on “as and when available basis” at the applicable gas price as notified by OGRA from time to time. Further, in case gas reserves from HRL reservoir feeding most of the fertilizer plants starts natural depletion, then, in such eventuality, Mari Energies may be allowed to backfill the depleted gas volumes of its existing consumers out of Ghazij/ Shawal reservoir.

The gas sale price for fertiliser consumers, as notified by OGRA, shall not be less than the applicable wellhead gas price to avoid any eventuality of a negative gas development surcharge (GDS), under all circumstances.

Currently Ghazij/ Shawal reservoir is producing only 48 mmcfd which is allocated to SNGPL under EWT arrangements. Reportedly, the full potential supply from Ghazij/ Shawal shall be available in 24 months as per Mari Energies Ltd; till such time, the current production of 48 mmcfd may be equally allocated to Fatima Fert and Agritech Ltd as per the applicable wellhead price.

The balance of gas volumes may continue to be supplied from backfill (HRL reservoir). No further subsidised RLNG would be provided to both plants beyond 30.09.2025 unless required for network stability. SNGPL has been compensated through injection of gas volumes up to 70 mmcfd from Mari Energies Shewa gas field which is currently being curtailed due to line-pack issues (the existing allocation to remain as is).

Since actualization of full potential of Ghazij/ Shawal will take time, the present gas supply arrangement between FFC (PQ) and SSGCL may be continued till finalisation of gas supply arrangements from Ghazij for FFC(PQ) as per proposed allocation on as and when available basis.

Allocation of up to 110 mmcfd gas to SNGPL from Mari Deep approved by ECC in 2021 has expired in June, 2024, same may be regularised and re-allocated to SNGPL until expiry of the Mari Lease to meet deficit in demand on SNGPL.

After approval of summary already cleared by the Deputy Prime Minister/ Foreign Minister led Committee, the revised gas allocation will be as follows: (i) Fauji Fertiliser Company - 3 plants, 279.5 MMCFD from HRL; (ii) Engro Fertiliser (FEL)-Enven, 103 MMCFD from HRL; (iii) Engro Fertilisers Ltd (EFL) - old/ base plant, 105 MMCFD from HRL; (iv)) Fatima Fertiliser Company Limited (FFCL) 110 MMCFD from HRL; (v) Fatima Fertiliser Pakarab Fertilizers Ltd (PFL)- 58 MMFCD from SML/Sui; (vi) FFC (Port Qasim, Karachi, 104 MMCFD from Ghazi/ Shawal; (vii) Fatimafert (Sheikhupura), 68 MMCFD from Ghazi/ Shawal; and Agritech(Daud Khel), 50 MMCFD from Ghazi/ Shawal.

This implies that gas allocation to fertiliser sector from Mari Filed will be 597.5 MMCFD, followed by 58 MMFCD from SML/SUL and 222 MMCFD from Ghazi/ Shawal.

Copyright Business Recorder, 2025