Power generation: Low BTU gas price to be fixed at 70pc cost of oil

ZAHEER ABBASI

ISLAMABAD: The government has decided to fix price of low BTU gas for power generation at 70 percent cost of oil with the objective to maintain economic viability of generating power, it is learnt.

Sources told Business Recorder low BTU gas policy, likely to be approved by the Economic Co-ordination Committee (ECC) of the Cabinet, proposes that to maintain economic viability of generating power from low BTU gas, the price of the gas would have to be structured in such a manner that remains 70 percent of C&F price of HSFO, alternative fuel for power generation.

A premium of $ 0.0150 for each mmbtu reduction in the heating value of gas below 400 BTU/SCFT and up to 200 BTU/SCFT over and above the respective zonal price (Base Price) of Petroleum Policy, 2009 will be given for existing discoveries that have not been put to commercial production. Any discovery made under any subsequent petroleum policy would be linked with its price, and premium as mentioned above will be allowed. However, gas price under the Low BTU Policy shall not increase the threshold limit defined as 70 percent of the last six months average C&F price of imported HSFO in $/mmbtu and the price of C&F will be capped at 100 $/BBL for the purpose of calculating the low BTU gas price.

The exploration companies working interest owners, however, would have the right to sell the low BTU gas to third parties within Pakistan at mutually negotiated prices subject to the condition that if low BTU gas is supplied for power generation, it will be irrespective of the negotiated price. The power tariff would be based on the low BTU gas pricing parameters as provided in the policy.

The objectives of policy is to produce additional power at affordable tariff for the consumers by using indigenous gas resources as well as fast-track development and production of gas from the existing discovered low BTU gas reservoirs which remained dormant due to poor economics. The production of low BTU gas would help increase the power generation capacity of the country and reduce the energy deficit.

The Low BTU Gas Policy, 2011 would come into force from the date of its notification, however, the incentives would be applied to BTU gas discoveries that qualify and are accepted as "low BTU gas" under the existing and future exploration licences and other leases but are not in production prior to the notification of this policy.