Mari Gas Field: Fertilizer industry enjoys govt support

ISLAMABAD: The country’s fertilizer industry has government support for allocation and utilization of Mari Gas Field for fertilizer sector to avoid increase in urea prices through import besides disruptions in its supply in the country.

At a recent meeting presided over by the Prime Minister, a committee headed by Petroleum Minister and comprising officials of Petroleum Division, Power Division, Finance Division, NEPRA and OGRA were tasked to examine details of the proposal for system wide WACOG and submit recommendations.

The WACOG bill envisages allowing Oil & Gas Regulatory Authority (OGRA) to charge weighted average on cost of indigenous gas and imported RLNG (re-gasified liquid natural gas) to consumers.

The local fertilizer sector fulfils the entire urea demand, producing 6.4 million tons annually with an installed capacity of 6.7 to 6.8 million tons. Local production, combined with minor seasonal imports, saves the government approximately $ 2.3 billion annually with a huge import substitution over the past decade.

Fertilizer Manufacturers of Pakistan Advisory Council (FMPAC) in a letter to Ministry of Energy stated that the Mari Gas Field’s Habib Rahi Limestone (HRL) reservoir, with its low BTU gas is uniquely suited for fertilizer production.

This dedicated gas source has been the cornerstone of the fertilizer industry’s growth, ensuring reliable and cost- effective urea supply. The HRL gas is supplied directly to fertilizer plants through a dedicated pipeline network, bypassing the national grid and avoiding significant CAPEX and OPEX investments required to treat and inject this gas into the Sui network.

According to the industry, it has invested heavily in plant modifications, gas compression, and pipeline infrastructure to utilize this gas effectively, amounting to over $ 200 million, with ongoing investments of $ 300 million to sustain gas supply pressures. Furthermore, this independent gas network operates without contributing to circular debt or requiring subsidies, with no UFG and gas bills and taxes paid promptly.

FMPAC argued that the fertilizer industry uniquely depends on natural gas as a direct raw material, unlike other industries that can switch to alternative energy sources. The current cost pressures from excess RLNG imports and inefficiencies in public gas utilities should not be transferred to the fertilizer sector. Doing so would result in higher Urea prices, burdening farmers and jeopardizing the agricultural sector and food security.

“Our proposal to allocate and supply gas from the Mari field exclusively to fertilizer plants under bilateral arrangements will have multiple benefits including affordability in urea prices, benefiting farmers and ensuring food security for the next decade,” FMPAC said adding that it would also ensure a reliable gas supply for the fertilizer sector, supporting full capacity operations and reducing import dependency.

This would prevent market instability and price distortions, safeguard the national economy and forex reserves. Additionally, it would encourage further investment in the fertilizer industry and contribute to the government’s vision of Green Initiative.

“Failure to accept this proposal will lead to escalating gas prices, higher urea costs, and potential disruptions in local urea production. This scenario would force reliance on costly imports, deplete forex reserves, and threaten food security and economic stability,” said Brig. Sher Shah Malik (retired) in the letter.

Copyright Business Recorder, 2024