Setting up of Combined Cycle Power Plant: Centre allocates 110mmcfd gas to KP

Federal government has allocated 110 MMCFD gas to Khyber Pakhtunkhawa that is produced in the province to set up Combined Cycle Power Plant (CCGT). Official sources told Business Recorder that KPK consistently pursued the Ministry of Petroleum and Natural Resources for allocation of 100 MMCFD gas for setting up CCGT power generation project(s) in the province under article 158 of the Constitution which stipulates that "the province in which a wellhead of natural gas is situated shall have precedence over other parts of Pakistan in meeting requirements from wellhead subject to commitments and obligations as on the commencing day."
The matter was raised by the KP government at various fora, ie, CCI meeting held on July 31, 2013 and at Prime Minister's level through various correspondences. In this regard various meetings were held between the KP government and the Ministry of Petroleum and Natural Resources. On all these occasions, the KP government was categorically informed that no firm gas allocation can be committed in view of scarcity of gas on the system vis-à-vis gas production in the province and the declining gas reserves. The projected gas shortfall is 1,386 MMCFD in 2014-15, 1,500 MMCFD in 2015-16, 1,791 MMCFD in 2016-17 and 2,065 MMCFD in 2017-18.
According to the Petroleum Ministry, the present average gas supply from various gas producing sources in KPK is 370 MMCFD whereas average gas consumption in the province is 260 MMCFD. Contrary to summer months the province fully consumes gas in winter months that it produces, ie, 370 MMCFD. Thus the surplus gas of 110 MMCFD (minus/plus) would not be available in summer months if the present gas demand in the province is contained at its existing level which has a remote possibility.
Further the long-term supply projections obtained from the producers indicate a declining trend in gas production after 2015 unless the new sources are added which is subject to provision of adequate security cover to the oil and gas exploration and production companies for exploring the new prospects. Petroleum Ministry further argued that the power project(s) based on declining gas resources would create legal/financial issues at a later stage. However, if KP government insists on gas allocation for power generation in the province, this can only be agreed without any firm commitment and that in case gas demand/consumption of the province exceeds its gas production, the proposed power plants and other sector would be subjected to gas load management.
To deliberate on this issue the last meeting was held on June 27, 2014 between the KP government and Ministry of Petroleum wherein it was agreed that keeping in view the sanctity of article 158 and commitments of high office, Petroleum Ministry would place gas allocation issue before the ECC.
Keeping in view deliberations with the KP government, Petroleum Ministry proposed that gas produced in KP may be allocated to the KP government for setting up a CCGT based projects(s) in accordance with the following formula: (i) in the first phase 50 MMCFD gas may be allocated by January 1, 2016; (ii) in second phase another 50 MMCFD gas may be allocated by January 1, 2018; (iii) the project(s) would be dual fired and that supply of gas would be subjected to gas load management; and (iv) all the risk and cost in setting up power project(s) will be borne by the KP government in the eventuality of depletion of gas resources within the province or demand increase in other sectors.
The KP government will also complete bankable feasibility, land acquisition, regulatory approvals, financial close and EPC tendering. Finance Minister Ishaq Dar at a recent meeting approved the proposal with the condition that the gas will be given to PPIB available to KP only after following the appropriate procedures laid down in rules and regulations of the PPIB.