OIL IMPORT BILL TOWARDS BULGING

14 OIL-BASED IPPS AND RENTAL POWER UNITS ARE ABOUT TO COME ON LINE

AMANULLAH BASHAR
(feedback@pgeconomist.com)

May 17 - 23, 2010

The oil import bill already exceeding $10 billion is bound to give a surprise with the increase of fuel consumption due to arrival of at least 14 new Independent Power Producers and rental powers allowed by the government to overcome persistent power crisis.

With the increase of costly oil consumption for power generation yet another hike in power tariffs is imperative as indicated by Dr. Hafiz Shaikh, Advisor to Prime Minister on Finance. This increase of 6 per cent will probably be slapped either in the forthcoming budget on June 5, 2010 or may be prior to the budget.

At least fourteen new projects, largely oil based will likely to come online during May-December this year hence the furnace oil demand may be shocking in the coming months after the arrival of new IPPs and rental power projects which would naturally call for expansion in fuel storage capacity for at least another 8-9 days inventories. The furnace oil consumption has already jumped 10 per cent on higher demand from IPPs during this summer.

Informed sources said that besides increase in fuel oil consumption due to oil based power generating units the demand growth for new cars reflected in 62 per cent growth in sales number of the automobiles would also add to the fuel consumption in the country.

The situation calls for fast track development of available domestic resources. Implementation on Iran gas pipeline project which is pending for over ten years is vital for reinforcing cheaper fuel supplies and to avoid piling up of circular debt in future on the back of rising fuel consumption

Besides fuel consumption in power generation, the consumption of aviation fuel has gone up by 19 per cent which is still constrained by supply availability.

The liquidity situation of the oil marketing companies is sure to be improved with the release of Rs116 billion by the government for settlement of the outstanding circular debt during this month, however the financial for this huge release is being framed through combination of Sukuk issuance, payment from fiscal account and syndicated bank loan to fill the gap. There are strong expectations for disbursement of 5th IMF tranche prior to upcoming budget, sources added.

ENERGY CRISIS IMPAIRING ECONOMIC GROWTH

The energy crisis is now more visible even in the largest city of Karachi with the introduction of gas rationing by Sui Southern Gas introduced in all major industrial areas and CNG stations with the view of energy conservation under the guidelines of Prime Minister Gilani.

Actually rationing for gas distribution already being carried out across the country has adversely affected the economic activity especially in the textile industry of Faisalabad and rest of the Punjab. Consequently the crisis would hit the export target of $19 billion at the end of the financial year which is approaching fast.

Although Prime Minister Yousuf Raza Gilani in his recent visit to Karachi told this correspondent that the government was actively considering expediting Iran Gas Pipeline as well as import of at least 1000mw of power from Iran, however such assurances call for practical moves rather than statements.

Surprisingly, the Iran gas pipeline project is pending for over a decade obviously due to pressures from United States. If it is true then the government should take the people into confidence and ask the US to make alternative arrangements for supply of fuel for power generation at an affordable price because according to informed sources the landed cost of Iran gas would be cheaper than the locally produced natural gas.

In the light of the recent Energy Summit chaired by Prime Minister in which it was decided to take major conservation steps and implement gas load management in the best national interest, SSGC held meetings with the representatives of different industrial associations before moving on the gas conservation plan.

SSGC management held series of meetings with various trade bodies namely SITE Association of Industry, Korangi Association of Trade and Industry (KATI), Landhi Association of Trade and Industry (LATI), North Karachi Association of Trade and Industry (NKATI), F.B Area Association of Trade and Industry (FBATI), and major CNG Associations of Sindh and Balochistan to discuss measures for implementing the gas load management plan on urgent basis.

It was decided that in Sindh and Balochistan, gas curtailment/closure plan will be implemented as per schedule.

Industrial areas will ensure staggered closure of gas supply on days mentioned below:

INDUSTRIAL AREAS

DAY (S) TIMINGS (24-HOUR BASIS)
SITE Mondays and Saturdays 8.00 am to 8.00 am (next day)
Landhi Tuesdays 8.00 am to 8.00 am (next day)
Korangi Wednesdays and Saturdays 8.00 am to 8.00 am (next day)
FB Area Thursdays 8.00 am to 8.00 am (next day)
North Karachi Fridays 8.00 am to 8.00 am (next day)

Industries operating on 24/6 basis (or less) will, therefore, resort to one-day additional closure in a week. Industries operating on 24/7 basis (round-the-clock) will voluntarily curtail/reduce gas consumption by 8-10%.

CNG stations' are already observing shutdowns every Friday from 12 noon to 12 noon Saturday (24 hours) in Sindh and Balochistan.