Natural Gas

Urea plants suffer Rs5.5bn loss

Posted on July 27, 2012. Filed under: Natural Gas, Pakistan |

LAHORE, July 25: In the first half of 2012, all SNGPL-based plants, including Agritech, DH Fertilisers, Pakarab and Engro (new plant), faced a collective loss of Rs5.5 billion in terms of revenue as their total sales of urea stood at 150,000 tons as against 316, 000 tons in the first half of last year.

In a statement, the fertiliser industry stated that 52 per cent decline in terms of sale translates itself in a revenue loss of Rs5.5 billion. The total urea production by SNGPL based plants in the first half of 2011 stood at 297,000 tons which declined by 33 per cent (or 198,000 tons) till June this year.

The plants operated at 18 per cent oftheir capacity during these six months against 25 per cent last year. During the first half, they faced an estimated gas curtailment of 82 per cent in which Agritech and Pak Arab got gas for 63 days each while Engro Enven and DH Fertilisers got gas for 33 days in the first six months of 2012.

In the first quarter of this year, all SNGPL-based and SSGC-based plants faced a loss of revenue by 53 per cent compared with first quarter of 2011, generating Rs8.16 billion revenue in the first quarter as compared to last years` Rs17.29 billion.

In 2012, four plants based on SNGPL as well as SSGC based FFBL lost profitability by 125 per cent and made acollective loss of Rs1.076 billion whereas the same plants had made profit of Rs4.3 billion in the first quarter of 2011.

The SNGPL-based plants are facing crisis as 82 per cent gas curtailment was never witnessed before 2012.

Despite making an investment of $2.3 billion in the last four years on new production capacity, making Pakistan world`s seventh largest urea manufacturer, there is an idle urea capacity of over three million tons.

Fertiliser sector officials said that if same gas curtailment continues during the remaining five months of 2012, the SNGPL-based fertiliser plants would be forced to shut down permanently.

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300 CNG stations facing closure

Posted on July 27, 2012. Filed under: Energy crisis, Natural Gas, Pakistan |

ISLAMABAD, July 25: In a bid to put a cap on once robust CNG industry the government has refused to renew the licence of nearly 300 CNG stations, paving way for the closure of all CNG outlets in three years` time.

The Ministry of Petroleum in a written directive, available with Dawn, has stopped Ogra from granting extension/renewal in CNG licences of operational stations on their expiry. CNG licences were granted for the period of 15 years with provision of a five-year extension. The government, however, has decided not to grant any extension to manage the shortfall of gas.

Adviser to Prime Minister on Petroleum and Natural Resources Dr Asim Hussain on July 13 told Senate that due to continuous gas crisis, the CNG stations would be closed down in phased manner.

Well-placed sources aware of the development told Dawn that with this direction of the ministry around 290 CNG stations would be closed down shortly after completing 15 years duration in accordance with Ogra licence.

They said many licenseeshas approached Ogra for grant of renewal in their CNG licences, however, their cases have now been held up by Ogra, adding, `currently 3,337 CNG stations are functioning` They said the ministry of petroleum had now started materialising its three years long policy by putting a ban on CNG business. The adviser verbally directed Ogra not to grant five years renewal/ extension in the existing CNG marketing licences on their expiry date under Rule 7 (2) of Pakistan CNG (Production & Marketing) Rules, 1992 and further advised Director General (Gas) of the MP & NR to issue policy guidelines/ instructions in the matter to Ogra.

The CNG industry was set up in 1997 in Pakistan. It saw a massive boom due to high petroleum prices during the past decade and 3.5 million commercial and private vehicles were converted to CNG.

But Pakistan started experiencing gas shortfall in 2007 which worsened in the following years forcing government to put an end to CNG industry which is estimated to be valuing more than Rs15 trillion.

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Govt bans import of CNG cylinders, conversion kits

Posted on December 16, 2011. Filed under: Natural Gas, Pakistan |

ISLAMABAD: The Economic Coordination Committee (ECC) of the cabinet has approved a ban on the import of CNG cylinders and conversion kits in the wake of the current gas shortage in the country.
The ECC which met here on Thursday with Minister for Finance and Economic Affairs Dr Abdul Hafeez Shaikh in the chair also banned installation of new CNG kits in vehicles.
The existing stock and its owners shall be allowed to use their kits and cylinders, and no new licence shall be issued in this regard, the ECC decided. In the same way, CNG-fitted public transport vehicles i.e. buses/vans are exempted from this moratorium.
The ECC reviewed its previous proposal of monthly natural gas load management programme (winter 2011) on the SNGPL system, and decided to withdraw the previous approval of supply of 76 MMCFD gas to IPPs because of severe shortage of gas in the coming months and to enhance the gas supply to fertiliser plants.
The ECC also approved the summary “energy efficiency audit of fertiliser plants” and “ban of POL products export to Afghanistan and Central Asian Republics” (CARs), proposed by the Ministry of Petroleum and Natural Resources.
The committee was informed that the actual condition is quite different as this import is being practiced only on paper and all these POL products are being sold here in Pakistan after going through the export process.
The ECC also decided that purchase of 200,000 tones of sugar will be re-tendered with certain modifications in the tender terms and conditions. Prior to this decision, the committee reviewed the sugar situation in the country and discussed in detail the proposal to purchase 200,000 tons of sugar from domestic sugar mills.
The finance minister appreciated the sub-committee’s effort in lowering the sugar pricefrom Rs63 to Rs53.73 on December 12. The committee directed the TCP to issue a gallop tender and finalise the process within the coming 10 to 12 days.
The ECC was of the opinion that previously blacklisted sugar mills will also be allowed to bid in this tender provided they deposit the penalty to the TCP. The committee discussed proposal of the Ministry of Industries for import of urea for the Rabi season 2011-12.
The ministry informed the ECC that import requirements of urea are 700,000 tones to meet overall demand of 3,400,000 tones, in which 200,000 tons have already been allowed. The petroleum minister added that import requirements of urea would increase further due to short supply of natural gas in the coming two months. The ECC discussed the proposal at length and decided to meet the remaining shortage of urea for Rabi 2011-12.
The finance minister being the chairman of the ECC enquired from the committee members about formula on the basis of which gas is provided to fertiliser plants, and took exception that despite provision of gas to certain plants they do not lower the prices of their products.
The minister also expressed concern on the pricing regime and subsidy provision and decided that a proper distribution mechanism be identified, and in this regard formed a committee headed by the petroleum minister and comprising secretaries of Water of Power, Production, Finance, Food, Industries and Planning Commission deputy chairman, to deal with fertiliser companies for fixing the urea price. The committee will report to the ECC in three to four days.
The committee also deliberated upon the distribution of available and imported urea, and directed the concerned ministry to ensure the pricing regime for the commodity.

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Iranian gas still a long way

Posted on August 29, 2011. Filed under: Natural Gas |

NOTWITHSTANDING Iranian optimism over completion of IranPakistan Gas Pipeline by the end of 2012, a delay seems inevitable beyond December 2014 deadline set under the bilateral implementation agreement between the two states. A late starter, Islamabad has sounded Tehran to allow a six-month grace period beyond December 31, 2014.

A formal discussion on extending the deadline is expected soon. Islamabad is seeking extension in the cut-off date because of a penalty clause in the agreement that makes mandatory for it to buy gas from Tehran or pay for the equivalent quantities if it is unable to purchase.


Iran is quite comfortable with construction schedule as it is already laying pipeline from its gas fields to border towns around Iranshehr.


Pakistan has lost a lot of time mainly to internal wrangling over who should prepare technical studies related to route survey, front end engineering design (FEED) etc. Sui sisters, Sui Southern Gas Company Ltd (SSGCL) and Sui Northern Gas Pipeline Ltd (SNGPL) that together have one of the largest gas transmission system in the world, were forced to stay out of the race to pave the way for foreign firms.


Then security agencies had their concerns over the proposed aerial survey by foreign consultants for the pipeline’s Gwadar to Multan and Nawabshah route. They thought the petroleum ministry should have sought security clearance before taking the decision for the survey, particularly in Balochistan. .


Under the petroleum policy and other relevant rules, aerial survey for the identification of minerals and oil and gas deposits should be done by the Geological Survey of Pakistan in coordination with the security agencies. Sui gas companies had shown interest to complete the physical survey of the pipeline route in 8-10 months because of their expertise in the area.


But the petroleum ministry decided to award the contract to a foreign consultant — a local representative of the ILF of Germany – in joint venture with the National Engineering Services of Pakistan at a bid price of $22 million that was later intriguingly increased to $55 million.


As the contract signing for route survey and FEED remained hostage to minor disputes over taxation and security related issues, authorities panicked that further delays could attract penalties from Iran, starting with about $200 million by December this year. The real worry is that Iran may not restrict itself to just penalty and also demand construction cost of the pipeline from South Pars field to Sistan.


The completion of route survey and FEED study is a prerequisite to hold an investor conference, bidding for EPC contract, financial close and start construction of 785 kilometer piece of the pipeline from Iran border to Nawabshah in Sindh at an estimated cost of $1.25 — 1.5 billion. Under the agreement, the FEED study should be ready by December 2011 and after some other project milestones, the first flows from the pipeline should start by December 2014.


Apart from the World Bank and the Asian Development Bank’s interest to be part of the financing to lay pipeline inside Pakistan, the Russian and Chinese companies are competing to get the construction contract for the pipeline project. Given their existing bilateral relationship, Pakistan is more likely to assign engineering, procurement and construction (EPC) contract to Beijing which is also said to have shown willingness to provide financing for the project.


Such an equation also involves Chinese interest in extending the pipeline, perhaps at a later stage, to its Eastern regions or at the very least take advantage to set up industrial units in a specialised zone around Gwadar. Nevertheless, senior executives of the Russian energy giant — Gazprom — have been visiting Islamabad quite often to bid for the project and have already submitted formal expression of interest. The IPI (IranPakistan-India) as the project was originally known was conceived in 1990. One should hope it materialises in 2015.


The SSGC and the SNGPL — with vast domestic pipeline experience are also in the run for the project to improve their profile as international pipeline engineering firms and to enhance cash flows through IP contract to flow about 750 mmcfd per day of gas from Iran’s South Pars gas field. The gas flows could ultimately be enhanced to 3.2 BCFD in view of the Chinese interest.


After New Delhi pulled out of the project on being wooed by the US through the landmark civil nuclear deal, former Finance Minister Shaukat Tarin, as head of the Economic Coordination Committee (ECC) decided to go for importing only 750MMCFD — instead of originally planned 3.2 BCFD — from Iran to limit foreign exchange outflow to a single source.


The bilateral agreement has the provision to enhance supplies to 1BCFD, although the project design envisages throughput enhancement to 3.2 BCFD at a later stage given a 42” diameter of the pipeline.


Pakistan has been interested in attracting both Chinese firms and Gazprom in view of Russian experience in pipelines and Chinese expertise in engineering and ability to provide funds. Discussions with Chinese officials at a joint economic commission’s meeting were reportedly held early this month in Beijing by a Pakistani delegation led by Water and Power Minister Syed Naveed Qamar.


Separately, Islamabad had also invited Gazprom, the largest extractor of natural gas in the world, to participate in the Iran-Pakistan pipeline project in a meeting of the Pakistan-Russia Inter-governmental Commission held on September 22, 2010 in Russia.


Pakistan would prefer to fund the project through public-private partnership in an attempt to ensure at least a part of the return on financing to remain within the country.


Pakistan and Iran had signed the gas sale purchase agreement in June 2010. A segmented approach has been adopted for the IP gas pipeline project whereby each participant country — Iran and Pakistan — are responsible for building and operating the pipeline transportation network in their respective territories.


Pakistan gas supplies have stagnated at four bcfd while the demand has risen to 6.5 BCFD. The constrained demand is estimated to rise to eight bcfd in three years. Iran has an estimated 982 trillion cubic feet (TCF) or 27.8 trillion cubic meters (TCM) of proven natural gas reserves which are the world’s second largest after Russia but has been finding difficult to develop them in view of the US and the UN sanctons.


The most significant gas field in Iran is the offshore South Pars field, which is estimated to have 450 TCF proven natural gas reserves. It is the dedicated gas supply source for the IP project.

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Crude oil, natural gas: provinces to get less royalty

Posted on June 17, 2011. Filed under: Finance, Fossil fuels, Natural Gas |

JUNE 17, 2011


The budget for fiscal year 2011-12 envisages a reduction in the royalty on crude and natural gas, documents reveal. In 2011-12, royalty on crude oil is estimated at 14.8 billion rupees – 4.4 billion rupees lower than in the current fiscal year while royalty on natural gas for next year is estimated at 32.1 billion rupees – 2.4 billion rupees less than in the current fiscal year.

Well-placed sources told Business Recorder here on Thursday that, “the overall gas production in Pakistan is decreasing with each passing day. These days, about 200 MMCF shortfall in gas output has been observed. The overall gas production is now 3.6 billion MMCF per day reduced from 4 billion MMCF per day. Similarly, oil production has declined from 65,000 barrels to 61,000 barrels per day”.

Sources disclosed that the main reason behind lower gas and oil production is attributed to exploration activities that are simply not gearing up in Balochistan and Khyber Pakhtoonkhwa (KPK) – provinces beset with law and order issues that have put an effective stop to new foreign investments for exploration of gas and oil. Secondly, most of the old gas and oil wells are steadily losing their production capacity. The risks are simply too high in exploration in the oil and gas fields in KPK and Balochistan, sources added.

“When ‘Petroleum Policy 2001’ came into force, 84 areas throughout the country were identified for the exploration of oil and gas wells. Out of these 84, just 2 blocks have now been discovered but work on these two is still pending due to the negligence of the government and these oil and gas reserves have started depleting”, sources further revealed.

The government paid Rs 53.7 billion on account of royalty on oil and gas in 2010-11 while the total amount of royalty receipts paid to provinces on oil and gas during the last four years (2007-11) is Rs 165.4 billion. During 2010-11, Rs 8.6 billion were paid to Sindh province as royalty on crude oil; Rs 8 billion to Khyber Pakhtoonkhawa (KPK), Rs 2.7 billion to Punjab and Rs 2 million to Balochistan while a total amount of Rs 19.2 billion was paid as royalty on crude oil to the provinces in the current fiscal 2010-11.

Sources said, “During the last four years (2007-11), Rs 54.2 billion has been paid to the provinces as royalty on crude oil. The total share of Sindh in royalty receipts paid by the government during the last four years was Rs 18.6 billion; share of Punjab was Rs 8 billion, Rs 8.2 billion was given to KPK and Rs 6 million to Balochistan”.

Sources disclosed that Rs 4.4 billion was extended to Sindh as royalty, Rs 2.1 billion to KPK, Rs 1.7 billion to Punjab and Rs 2 million to Balochistan were paid as royalty on crude oil in the last fiscal 2009-10. Rs 34.5 billion has been paid as royalty on gas to the provinces during the current financial year with Sindh receiving Rs 25.9 billion, Balochistan Rs 3.9 billion, KPK Rs 3.6 billion and Punjab Rs 932 billion share in royalty on gas.

“During the last four years ( from 2007-11), Rs 111.2 billion have been provided as royalty on gas to the provinces with Sindh receiving Rs 57.6 billion, KPK Rs 2.5 billion , Balochistan Rs 13.2 billion and Punjab Rs 3.3 billion”, sources said. During 2009-10, total royalty paid to the provinces on gas stood at Rs 24.05 billion, with Sindh receiving Rs 17.2 billion, KPK Rs 1.2 billion, Balochistan Rs 4.5 billion and Punjab Rs 932 million.

Copyright Business Recorder, 2011

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15 items used in CNG compressors made duty free

Posted on June 17, 2011. Filed under: Energy crisis, Natural Gas |

JUNE 17, 2011


Fifteen items used in the manufacturing of CNG compressors would be subject to zero percent customs duty, which includes electric motor, piston pins, rods, rings and water flow switch. Sources told Business Recorder here on Thursday that prior to budget (2011-2012) import of 10 items used in the manufacture of CNG compressors were allowed at zero percent duty.

On the recommendations of the Engineering Development Board (EDB), the existing list is being substituted with 15 new items at the same rate of 0% duty by amending SRO 565(1)/2006.

List of items used in manufacturing of CNG compressors, subjected to zero-percent customs duty included bearings Pakistan Customs Tariff (PCT) Code 8482.4000, 8482.2000; geared pump, 8413.8110, valves, 8481.3000, 8481.4000; forced feed lubricator pump, 8413.8190; pressure and temperature gauges, 9026.2000; electric motor, 8501.5310, 8501.5290; junction box glands, 8536.3000; oil filter assembly, 8414.9090; flexible pressure hoses, 4009, 2190; SS tubes/ pipes, 7304.4100, 7306.9000; aluminium bars 6082.7075, T-6, 7604.2910; connecting rods forged 8.5 kg, 8414.9090; piston pins, rods, rings, 8414.9090; flexible water hose (SS braided), 4009.1190 and water flow switch falling under PCT heading 9026.1000 would be subject to zero percent customs duty. The incentive for CNG compressors industry was announced in budget (2011-2012), sources added.

Copyright Business Recorder, 2011

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Argentina to provide tech-based expertise in CNG sector

Posted on June 17, 2011. Filed under: Natural Gas |

JUNE 17, 2011


Federal Minister for Environment, Samina Khalid Ghurki, said, Pakistan is the most vulnerable country of the world that is facing adverse impacts of environmental degradation. “Pakistan attaches greater importance to introduce alternative energy resources in the country”, said Ghurki during a meeting with Ambassador of Argentina Rodolfo J. Martine-Saravia and Regional Director of Galileo, S.A Juan Ojanguren, here on Thursday.

Federal Minister further said that government of Pakistan is committed to adopt clean energy system of transportation in the country. The Minister continued that Pakistan considers the environment as a serious issue and promotes the public private partnership for the environment-friendly activities throughout the country. Pakistan is bearing the loss of about Rs 365 billion per year due to environment’s degradation. The Government desires to introduce Pakistan as a clean and green country in the global community, she added.

Environment Minister dwelt upon the fact that Pakistan is the world’s largest consumer of CNG. Government is taking maximum steps to make Shaheed Benazir Bhutto CNG Buses Project as landmark initiative of the PPP Government for the best interest of the people of Pakistan. This will be the great addition of Mass Transit System in the country and people of Pakistan would be able to enjoy clean and cheap transportation facilities.

Ghurki also said that Pakistan and Argentina are enjoying cordial relations and these relations would further grow in future. She underlined that Pakistan has a desire to get all possible benefits from the Argentine for the provision of modern technology-based expertise in CNG sector. Rodolfo J. Martine-Saravia said that Pakistan and the Argentine are the world’s leading countries in CNG sector. Technology-wise, we are very much sound and having skilled and qualified expertise. The Government of Argentina wants to extend co-operation with Pakistan in this important sector.

He hoped that through exchange of knowledge and expertise, better understanding would be developed and different other opportunities could be explored for further advancements. He said that prime issue is that Argentina wishes to introduce environment friendly technology with complete security in Pakistan. The Ambassador underlined that Shaheed Benazir Bhutto CNG Busses Project is an important project and Argentina can play its important role to make this project successful by introducing cheap and environment-friendly energy resources.-PR

Copyright Business Recorder, 2011

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