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ISLAMABAD: The Federal Cabinet, which is scheduled to meet on Tuesday (Jan 26) with Prime Minister Imran Khan in the chair, is expected to review the decision of "gas moratorium for industry" taken by the Cabinet Committee on Energy (CCoE), on January 21, 2021 as the entire industry is up at arms, saying that the decision is ill-planned and taken without taking it on board, well-informed in Petroleum Division told Business Recorder.

Differences have been witnessed among the members of the CCoE, including Information Minister, Shibli Faraz, Commerce Advisor, Abdul Razak Dawood, Secretary Commerce and Chairman Nepra.

The country's influential sectors have approached at the highest level and conveyed their concerns on the decision and its impact on exports in future.

On January 21, 2021, Petroleum Division stated that SSGCL and SNGPL were engaged in transmission and distribution/sale of natural gas in the country. Except for a few dedicated gas consumers i.e., power plants/ IPPs and fertilizer plants, gas to all other bulk consumers including power, fertilizer, industry, CNG, cement and residential consumers was supplied through the extensive network of these two gas utility companies. With the passage of time gas reserves have been depleting fast and new natural gas discoveries have barely kept pace with the natural depletion and there has been no net increase in the availability of indigenous gas for the last many years. In order to optimally use the scarce available natural gas resource, an exercise was undertaken with respect to assessing the usage of gas by captive power plants (CPPs) both on SSGCL's and SNGPL's supply systems.

The details of surveys conducted revealed that out of the above total 1,211 CPPs, only 227 (SSGC:159, SNGPL:68) were cogeneration units which not only generate power for self-consumption but also generate heat energy for their industrial use. SNGPL supplies RLNG to CPPs (non-export) at a monthly OGRA determined price for LNG whereas similar units in the Provinces of Sindh, Khyber Pakhtunkhwa and Balochistan operate primarily on system gas supply. Similarly, the CPPs (Export) receive blended gas/RLNG supply at a tariff of $6.5/MMBTU in Punjab whereas similar units in the Provinces of Sindh, Khyber Pakhtunkhwa and Balochistan operate on system gas supply with an exception of a special arrangement of Rs 930/MMBTU only for this winter till 28-02-2021. The comparison of the latest revised tariff was provided as under: (i) captive (general industry) system gas tariff, Rs 1087 per MMBTU and RLNG, Rs 1,225 per MMBTU for November 2020 and: (ii) captive (export industry), system gas tariff Rs 852 and RLNG tariff, Rs 1,040 per MMBTU.

Petroleum Division apprised that every winter, the demand of the high priority sector, ie, residential consumers increases manifold and gas utilities while remaining within the available supplies are constrained to exercise load curtailment programs keeping in view the following priorities: (i) domestic and commercial; (ii) power sector, export oriented industry; (iii) general industrial fertilizer & captive power;(iv) cement including its captive power and; (v) CNG.

Petroleum Division was of the view that with sufficient availability of power due to substantial installed generation capacity, the continued supply of precious depleting resources, ie, natural gas to CPPs did not appear to be rational which cannot match the efficiency of gas/RLNG-based' IPPs in the national grid. Petroleum Division recommended following policy guidelines with respect to supply of gas to industrial units for self-generation of electricity:. (i) supply of natural gas shall be discontinued with effect from February 01, 2021 to all industrial units that are currently using it as fuel for the primary purpose of electricity generation for self-consumption; (ii) however, this moratorium/discontinuation of natural gas supply will not apply to those industrial units that are either not connected to the electricity distribution grid; or using it as fuel for the primary purpose of steam generation (co-generation units); or; to the extent, and until such time, that they are unable to be fully served by the relevant power Distribution Company (DISCO) for their electricity requirement.

Those industrial units that are currently using natural gas as fuel for the primary purpose of electricity generation but are not connected to the national electricity grid shall be actively encouraged and expected to apply for a new connection from the relevant DISCO as soon as possible and to be completed no later than December 1, 2021. This policy shall apply to all industries, including those classified as zero-rated/export-oriented, across Pakistan both on gas and RLNG.

During the ensuing discussion, the Secretary, Petroleum Division informed that there were 1211 captive power units on both SSGCL and SNGPL network consuming about 415 mmcfd gas. Out of these, 610 units were in export industry and 601 units were in non-export industry. He also noted the current gas and RLNG tariff being charged to captive power units. The SAPM on Petroleum informed the meeting that during November, 2020 a series of meetings were held in the Prime Minister Office with Power and Petroleum Divisions on the shortage of gas and mitigation measures. During the meetings it was advised that in view of electricity surplus situation the captive power units may be asked to shift to the electricity grid so that gas savings could be utilized for other sectors of economy. Accordingly, Petroleum had drafted the proposals which were already discussed between Power and Petroleum Divisions. He further stated that captive units have efficiency of 30 to 38% which was much lower than efficient Independent Power Plants (IPPs) that have an efficiency of 50 to 62% and thus these units were generating more power at less gas utilization than captive units. He also informed that an energy efficiency audit of captive power units had been approved by CCoE few months ago under which NEECA was authorized to conduct audit but the captive units have got stay orders from the court of law and are not allowing NEECA to conduct energy efficiency audit.

Minister for Information & Broadcasting stated that grant of stay orders might have been due to some legal lacuna in the policy guidelines issued to captive power units. He added that necessary planning should have been made in advance to address the issue is likely shortages.

The Chairman Nepra, stated that captive power was doing a value addition by utilizing gas and if they were disconnected from gas supply, the load would be shifted to the grid while their cost of doing business would increase. SAPM on Power was of the view that decision of disconnecting gas supply has remained under discussions for past many months. He clarified that stay orders were being granted against NEECA for conducting energy efficiency audit so it was not against the Petroleum Division as was being misconstrued. He stated that gas/RLNG should be utilized by the efficient power plants instead of captive units which should take electricity from grid for their power needs.

Adviser to the Prime Minister on Commerce & Investment highlighted that when gas load management plan was last discussed in the CCoE meeting, it was assured by Petroleum Division that supply of gas would be curtailed to export sector only in extreme conditions. The SAPM on Petroleum clarified in response, that export sector on SSGCL has got consistent gas supply throughout winter and no load shedding for even a single day was exercised. However, on SNGPL export sector was curtailed gas for only one day. It was stated that exemption criteria may cautiously be exercised to block any loopholes. Secretary, Commerce Division highlighted the concern that disconnecting gas supply to captive units of exports may impact the export orders negatively. Minister for Planning, Development and Special Initiatives stated that deadline for captive units of export sector may be extended and time should be given to captive units to shift to electricity grid.

Date for disconnection of gas supplies to Captive Power Plants (non-export industry) will be February 01, 2021 whereas date for disconnection of gas supplies to Captive Power Plants (export industry) will be March 01, 2021. For those units who have electricity connections but the sanctioned load is less than their requirement, they are required to immediately apply for enhancement of load and the respective DISCO is to be required to provide such enhancement expeditiously. Until such enhancement, they shall be provided gas, provided they shall first fully utilize their existing sanctioned load and once the load enhancement is done, the gas connection will be disconnected. Before disconnecting gas supply to these industrial units, the relevant DISCO would confirm in writing its technical ability to serve the sanctioned power load.

Captive Power Plants Non-Connected with Power Grid (Having No Electricity connections): All such Captive Power Plants (Export/Non-Export industry) shall submit their applications to respective Electricity Distribution Company (DISCO) for grid connectivity by March 31, 2021. DISCOs shall expeditiously process the applications before December 01, 2021. Until the electricity connection is operative, the gas companies will not disconnect gas supplies to such units which have applied for a connection by the due data (March 31, 2021) and have not been provided the same by the DISCO.

If a Captive Power Plant claims to be a co-generation unit, it shall make such declaration latest by February 01, 2021. NEECA will conduct a third-party audit of all such Captive Power Units (Export/Non Export) claiming to have co-generation facility within 3 months in order to avoid rent seeking capacity against continued gas supply to such units. If the audit confirms cogeneration facility, gas supply will continue but otherwise it will be disconnected. Power Division shall finalize the detailed and transparent mechanism for third party audit within one week.

Copyright Business Recorder, 2021