Ministry of Petroleum and Natural Resources is to seek approval of a policy framework for utilisation of unutilised gas from the Economic Co-ordination Committee (ECC) of the Cabinet after the latter refused to clear a proposal for allocation of 50MMCFD gas for a 50MW power plant, well informed source told Business Recorder.
M/s PPL with a 65 percent working interest along with its joint venture partners Government Holding(Pvt.) Ltd(GHPL) and Asia Resources Oil Ltd(AROL) with a 25 percent and 10 percent working interests, respectively, discovered gas in Wafiq X-I and Shahdad X-I wells in the said block. Both the wells were under Extended Well Testing (EWT) phase during which an estimated 30-60 MMCFD gas would be produced.
According to sources, pursuant to an ECC decision in Case No.ECC-153/19/2009 Ministry of Petroleum and Natural Resources on September 18, 2013 allocated about 30-60 MMCFD EWT gas from M/s PPL's Wafiq X-1 and Shahdad X-1 wells of Gambat South Block to M/s Sui Southern Gas Company Limited (SSGCL) and to M/S Sui Northern Gas Pipelines Limited (SNGPL) on an equal sharing basis through swap arrangements.
The gas discovered in Wafiq X-1 has a significant amount of Carbon Dioxide (25%) and Nitrogen (18%) and it requires a custom-designed processing plant and flow lines of special metallurgy which were not readily available in the market. Setting up a processing plant to kick-off the EWT phase could take around 18-20 months. On August 15, 2014, ECC was informed that in order to bring the first gas online on a fast track, M/s PPL has come up with the request of allocation of 18 MMCFD (untreated/raw gas) EWT gas from their Wafiq X-1 well for setting up of a ± 50 MW power plant. M/s PPL have given a detailed working/viability of the said project and have stated that ± 50 MW power plant could be set-up on fast track within 8-10 months. M/s PPL would pursue the said project in parallel with setting up of gas processing facilities for sale of gas to SSGCL/SNGPL during the EWT phase.
It was further stated that post EWT phase, M/s PPL may review the option to continue power generation and set-up a permanent Combined Cycle Plant (CCPP) keeping in view the potential of existing discoveries to produce up to a plateau of 64 MMCFD for a period of 4 to 6 years. They maintained that the success of such a project would pave the way for other Exploration & Production (E&P) companies to follow.
The meeting was further briefed that in PPL's views it would be more viable to sell untreated gas for power generation as it would benefit from a higher NPV, IRR and an earlier payback and Government's take would also be 54% higher. Assuming PPL gets approval of power tariff from NEPRA in the range of 9-12 cent/Kwh, the operating lease option of power generation equipments would be more viable and result in low cost electricity generation and early magnetisation of discovered gas with an earlier payback of investment. While the circular debt risks can be avoided by option of selling gas to private purchasers like industrial zones/KESC/others via wheeling arrangement through NTDC "Payment via LC" clause can also be incorporated in PPA with the power purchaser in order to avert possible payment defaults.
It was explained that in addition to the above, M/s PPL foresees the following support from the Government in respect of flexibility in power policies: (i) a two-tiered licensing and tariff approval that permits PPL to operate a power plant on lease basis during the EWT phase and subsequently review to put up an IPP; (ii) fair returns during the EWT phase as well as where capital investment should be the bare minimum; and (iii) confirmed dispatch to the national grid and availability of transmission line up to the interconnection point of the plant.
Ministry of Petroleum and Natural Resources proposed that: (i) upto 18 MMCFD EWT gas from Wafiq X-1 may be allocated to M/s PPL for setting up a pilot project of ± 50 MW power plant on an operational lease basis subject to the flexibilities concurrence of Ministry of Water and Power/PPL; and (iii) Ministry of Petroleum and Natural Resources may be allowed to allocate unutilised gas for power sector projects during EWT period to the producers as a policy.
During discussion in the ECC it was pointed out that the proposal of Ministry of Petroleum and Natural Resources has sought relaxation in Petroleum Policy, 2009 which was approved by CCI and ECC of the Cabinet which was not the competent forum to relax the policy. The proposal was also outside the current policy. Moreover, views of PPIB, NEPRA and Law & Justice Division were required which have not been obtained. The transmission line to Shahdad Grid Station about 10 Kilometer away was also to be laid simultaneously for which Ministry of Water and Power has to submit PC-I of the project to Planning Commission for approval. The EWT gas can be offered through an open bidding process to third party. After a detailed discussion, the ECC decided that Ministry of Petroleum and Natural Resources may bring up a policy framework for utilisation of un-utilized gas till such time as it is connected to the main system.
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