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Urea-making plants: Ministries on warpath over RLNG supply

ISLAMABAD: Ministry of Energy (MoE) and Ministry of Industries and Production (MoI&P) are reportedly on the...
04 Dec 2020

ISLAMABAD: Ministry of Energy (MoE) and Ministry of Industries and Production (MoI&P) are reportedly on the warpath over supply of RLNG to the two Punjab-based urea manufacturing plants M/s Fatimafert and M/s Agritech.

According to official documents available with this newspaper, on November 26, 2020, the Cabinet Committee on Energy (CCoE) rejected a proposal of Ministry of Industries and Production (MoI&P) about supply of gas to both fertilizer plants beyond November 30, 2020.

During a CCoE meeting presided over by Planning Minister Asad Umar, Secretary, Ministry of Industries & Production, Afzal Latif observed that the two fertilizer plants which were allowed gas supply till November 2020, might face closure due to non-availability of gas.

The sources said, SAPM on Petroleum, Nadeem Babar, who is already embroiled in the current controversy on timing of LNG purchase, replied that while a policy decision had already been taken by the Cabinet in this regard, supply of gas to these plants beyond November, 2020 would not be possible.

Asad Umar observed that the Ministry of Industries and Production may consider an option to import fertilizer to meet the requirement of the country as and when required.

However, industry sources told this newspaper that the decision of the CCoE has not been implemented as gas is said to have been supplied to M/s Fatimafert even after November 30, 2020.

The sources claimed that M/s Agritech plant has been shut down due to non-availability of RLNG but this claim has not been verified independently.

The sources claimed that the Ministry of Industries, through intervention, has obtained permission from the ECC to run Fatimafert plant on "as and when available basis" and without any specific deadline. M/s Fatimafert's load is 49 MMCFD but the government has allowed 33 MMCFD which implies that the plant has been allowed to run on 2/3 gas availability.

"It is unclear as to how many more days, the plant will continue its operation as nothing has been given in writing by the government," the sources added.

It is claimed that when the CCoE minutes were presented before the cabinet for ratification on December 1, 2020, Ministry of Industries raised this issue and succeeded in getting more time for M/s Fatimafert against the decision of Asad Umar-led committee.

Another source told this newspaper that one of the ECC's decisions says that both fertilizer plants will continue operation till January 2021. This decision was cut off by the Ministry of Energy (Petroleum Division) that they will not supply RLNG after November 30, 2020.

"A number of meetings were held to further deliberate on this disputed point but both Ministries are not ready to move from their positions," the sources continued.

The federal cabinet had approved the supply of re-gasified liquefied natural gas (RLNG) at a concessional tariff of Rs 756/MMBTU to the two fertilizer plants from July 26 for three months. The initial government notification showed that an unbudgeted subsidy of Rs 969 million was being provided to these players to produce around 200,000 tons of urea to avoid any shortages in the country.

However, the actual subsidy impact is more than Rs 2 billion based on June prices of LNG notified by OGRA. Further, this decision was taken at a time when the projected annual demand of 5.9 million tons could have been met by indigenous gas-based manufacturers and a channel inventory of 0.4 million tons was also on hand to meet the minimum stock requirements.

The Cabinet has also approved the natural gas load management winter 2020-21 which is as follows: (i) there will be no planned curtailment for domestic sector in SSGCL and SNGPL system;(ii) there will be no planned curtailment of gas supply to export industry.

In case of an emergency, captive units of export based industry may be curtailed one day a week at the end of December 2020 - beginning of January 2021;(iii) gas supply to captive units of General Industry (non-export) will be curtailed as needed from middle of December 2020 to end of January, 2021. Gas supply to General Industry may also be curtailed, if needed, for one day a week, during the same period and; (iv) gas for CNG will be on as and when available basis. Petroleum Division shall also place before the Cabinet, details of economic costs as a result of diversion of gas supply from power sector and industry.

Copyright Business Recorder, 2020