GAS SHORTFALL

S.KAMAL HAYDER KAZMI,
(feedback@pgeconomist.com)
Research Analyst
, PAGE
Dec 26, 2011 - Jan 1, 2012

Natural gas is a valuable source of energy because it is versatile and burns cleanly. As a result, natural gas use is commonplace in applications including cooking, residential and commercial heating, feedstock, and electricity generation.

In Pakistan, the natural gas production and delivery system is not designed to produce and transport the amount of natural gas consumers want during periods of peak demand. In order to meet peak demand, distribution companies put gas into underground storage mostly near final consumers. The stored gas is supplied to meet consumers' needs during times of peak demand such as in winter.

There is wide gap between gas supply and demand currently in the country, affecting industrial, commercial and domestic consumers badly.

The industries agreed gas load management plan in the beginning of 2011 in view of acute gas shortfall. Citizens could not prepare their meals, as there is not sufficient supply of gas in the affected areas.

Gas distribution companies discontinue supply to CNG stations every now and then nationwide to fill the gap.

In Karachi and interior Sindh, all industries agreed to discontinue gas usage voluntarily for a specific period. It is expected that voluntarily closure will support conservation of gas and boost normal pressures to all consumers.

There is an estimated 200 million meter cubic feet per day (mmcfd) shortfall in the system of Sui southern gas company (SSGC) having total supply of 1100 mmcfd.

Low pressure in gas supply is due to the high consumption of gas especially during the timing of lunch or dinner as the demand escalates during these periods.

To prevent shortage of gas to the domestic consumers, SSGC is going to stop gas supply to the industries for two days in addition to enforce the weekly closures of CNG stations in Karachi.

It is also expected that the closure of both CNG stations and industries would help increase the line pack, which has fallen from 950 mmcfd to a historical low of 750 mmcfd.

Further, SSGC was also supplying 80 to 82 mmcfd to Karachi electric supply company (KESC) against the previous supply of over 150 mmcfd.

The government has finalized increase in gas prices for all sectors under petroleum levy on liquefied petroleum gas (LPG) and gas infrastructure development surcharge (GIDS). For fertilizer, industrial, commercial and domestic consumers, the tariff will be revised up by 14 per cent from 2012. The government has signed the GIDS amendment bill 2011 and the petroleum levy bill.

According to the notification, after the imposition of PL on LPG, the commodity price will increase by Rs12-14 per kg.

The revenue generated through PL on LPG and GIDS on gas would be spent on the development on Turkmenistan-Afghanistan-Pakistan-India (TAPI), Iran-Pakistan gas pipeline projects as well as laying of liquefied natural gas (LNG) pipeline project from Karachi to Lahore.

GIDS would increase the prices of CNG in Zone I by Rs141 per mmbtu.

The Zone I consists of the regions including Khyber-Pakhtunkhwa (KPK), Potohar, and Balochistan.

In Zone II, which consists of parts of the Punjab and entire Sindh province, gas tariff for CNG sector would be increased by Rs79 per mmbtu.

For fertilizer sector, tariff would jump by Rs197 per mmbtu, industrial sector Rs13 per mmbtu, KESC Rs27 per mmbtu, and independent power plants (IPPs) Rs70 per mmbtu.

The government would impose a petroleum levy of Rs5 per kg on the owners of CNG filling stations. After the imposition of GIDS, the gas prices for fertilizer sectors would touch Rs300 per mmbtu, which at present is around Rs103 per mmbtu.

The fertilizer sector has fallen prey to serious gas crisis due to poor planning of the government. The plants of two big urea production companies have been shut down due to shortage of gas supply. The plants of Dawood Hercules and Engro were closed due to low supply of gas to these plants.

ANNUAL GAS CONSUMPTION

FISCAL YEAR GAS (MMCFT) CHANGE(%)
2005-06 1,223,385 5.4
2006-07 1,221,994 -0.1
2007-08 1,275,212 4.4
2008-09 1,269,433 -0.5
2009-10 1,277,821 0.66
JULY-MARCH
2009-10 959,475 -
2010-11 939,960 -2.03

It is estimated that four big fertilizer companies, connected to the network of SNGPL, will have to shut down their plants on a permanent basis if the same policy of gas supply persists.

It may be noted that investment of over three billion dollar has been carried out in the fertilizer sector and some big companies have been producing fertilizer for the last 40 years.

The requirement of fertilizer is about 6.3 million tons in the country and the capability of the country's production is 6.9 million tons. But, this time 4.5 million tons production of fertilizer is expected due to shortage of gas.

CONCLUSION

During winter, gas demand ramps up significantly as this is a time when domestic consumers need additional gas supply for geysers (water heaters) and room heaters.

Solar technology can reduce the consumption of gas in household gadgets. This will definitely save good volume of gas to be consumed in productive economic activities of the industrial sector.

The government should ensure availability of solar-powered gizmos at affordable rates.

Domestic consumers should not take gas, a precious natural resource, for granted while using it.