The document discusses the impact of diverting natural gas supplies from the industrial sector to the power sector in Pakistan. It notes that this diversion has resulted in divisions amongst various stakeholders and presents challenges. It provides background on Pakistan's natural gas reserves and infrastructure as well as consumption trends by province and sector. The diversion of gas to address power shortages has negatively impacted fertilizer production and textile exports while increasing reliance on imported fuels. The document calls for an inclusive energy policy and prioritizing gas allocations according to economic value to maximize benefits.
Gas for Power Generation or for Industry - A case for Pakistan
1. In the name of Allah, The Most Beneficent, The Most Merciful 1
2. NATIONAL INSTITUTE OF MANAGEMENT, ISLAMABAD
14th Mid Career Management Course
Current Issue Presentation
on
Impact of Diversion of Gas from
Industrial to Power Sector
Presented by: Bilal Khan Pasha, Commerce & Trade Group
Sponsor DS: Mr. Javaid Iqbal
November 28, 2012
2
3. Sequence of Presentation
o Statement of Problem
o Introduction & Genesis of Issue at hand
o Broad Contours of the Issue
o Problems & Challenges
o Analysis
o Results & Future Scenario
o Conclusion
o Recommendations
o Questions & Answers 3
4. Statement of Problem
The diversion of precious and scarce natural Gas resource from
Industrial to Power Sector in Pakistan has resulted in the
emergence of sharp divisions amongst Power Producers,
Industries and Consumers – A case of Catch-22 for the Federal
Government
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5. Sources for Presentation
o Economic Survey of Pakistan 2011-12
o Pakistan Energy Year Book 2011-12
o Ministry of Petroleum & Natural Resources
o Ministry of Industries
o Ministry of Production
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6. Sources for Presentation
o Planning Division
o Oil & Gas Regulatory Authority (OGRA)
o All Pakistan Textile Mills Association (APTMA)
o Karachi Electricity Supply Company (KESC)
o International Energy Agency (IEA)
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7. Natural Gas in Pakistan – Brief Facts
o Natural Gas – Gift of Nature & Precious Resource
o Use of Natural Gas
o According to IEA, global natural gas proven reserves are 300 trillion
cubic meters
o Pakistan has proven reserves of 840 billion cubic meters (28 TCF) with
an Annual Consumption of 40 billion cubic meters (1.3 TCF)
o No uniform international natural gas prices
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8. Pakistan’s Primary Energy Supplies
2011-12
65 Million TOE
Natural Gas
Value of Natural Gas: $4.3 50.5%
billion
(4 BCFD)
Value of Coal
Local: $ 0.2 billion
Imported: $ 0.5 billon
Coal
6.3%
Value of Local Crude: $2.4 billion
(67,000 Barrel/Day)
Electricity
Oil Import Bill: $14.5 billion Oil 12.5%
(36% of total imports) 30.7%
(380,000 barrels/Day) Source: Economic Survey of Pakistan 2011-12
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9. Pakistan’s Natural Gas
Infrastructure
Peshawar
Consumers: 6.7 Million (1.6 million)
Transmission Network: 11,045 Km (879Km) Islamabad
Distribution Network: 128,758 Km (38,828 Km)
No. of Cities/Towns on gas: 307
No. of Villages on gas: 4,989
Lahore
Faisalabad
Quetta
Multan
Sui
AC1X-SUI
GAS FIELDS (156)
Sukkur
SSGC LINES
SNGPL LINES
COMPRESSOR
STATIONS (17)
Source: Ministry of MAJOR LOAD
Karachi Petroleum & Natural
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Resources
CENTRE (5)
10. Province Wise Gas Supply and Consumption
(2011-12)
10
MMCFD
Gas Supply: 3,862 MMCFD Gas Consumption: 3,511 MMCFD
Punjab
182
5% Baloch. [CATEG
Baloch. 242 ORY
KPK
667 360 7% NAME], [
18% 9% VALUE],
43.6%
Sind, [V
ALUE], 4 KPK
4.5% 175
Sind, [VAL
5%
UE], [PERC
ENTAGE]
Source: MPNR
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11. Province Wise Gas Supply and Consumption
(2011-12)
11
Gas Supply Gas Consumption
Province MMCFD % share MMCFD % share
Punjab 182 4.7 % 1531 43.6 %
KPK 362 9.4 % 175 5.0 %
Sind 2649 68.6 % 1563 44.5 %
Baloch. 669 17.3 % 242 6.9 %
Total 3862 100 % 3511 100 %
Source: MPNR 11
12. Province Wise Gas Consumers
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as on 30.06.2012
SNGPL SSGCL
Province /
Type Punjab KPK Sindh Balochistan Total
Domestic 3,594,937 516,871 2,239,731 223,853 6,575,392
Commercial 47,149 8,757 22,296 2,200 80,402
Industrial 5,798 830 4,077 56 10,761
Total 3,647,884 526,458 2,266,104 226,109 6,666,555
Source: MPNR
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15. Measures to Augment Gas Supplies (Imports)
Project Volume (MMCFD) First Flow
Transnational pipelines
Iran-Pakistan 750 2015
TAPI 1,325 2016
2,075
Liquefied Natural Gas (LNG)
Fast Track 200 June-2013
Long Term-1 400 Q1-2015
Long Term-2 400 Q2-2015
1,000
LPG Air-Mix (SNG)
SSGC 100 Q2-2013
SNGPL 150 Q3-2013
250
Total 3,325 Source: MPNR 15
16. Gas Allocation and Management Policy, 2005
S.No Category of Consumers Priority
1. Domestic and Commercial Sectors First
I) Fertilizer Sector; and
2. Second
II) Industrial Sector to the extent of their process gas
Independent Power Plants as well as WAPDA and KESC’s
3. Third
Power Plants having firm gas supply commitment under GSAs
General Industrial, CNG Sector and Captive Power Producers
4. Fourth
of export oriented Textile Industry
I) WAPDA’s and KESC Power Plants other than those listed
5. against S.no. 3 above Fifth
II) Captive Power Sector
6. Cement Sector Sixth
There is no gas load management in Khyber Pakhtoonkhwa and Balochistan 16
17. Current Load Management
Presently, following curtailment policy is being observed:-
• Two gas holidays per week are being observed by Industrial Sector
• Three gas holidays per week are being observed by CNG sector
• No curtailment in any sector in KPK in light of decision of
Peshawar High Court under Article 158 of the Constitution
• No curtailment in the Domestic and Commercial sectors
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18. Why the Use of Gas So Desirable ?
Industry incl. Fertilizer
Feedstock for
manufacturing
Only raw material for
production
Optimal use of scarce
Power Sector resource Domestic
Consumers
Cheap fuel
Uninterrupted power
Assured Supplies
Cheap fuel for heating
& transportation
Natural
Gas
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19. Gas Sale Prices Effective from July 1, 2012
Final
A. Domestic Sector Monthly consumption Level Sale Prices Cess Price
Slab Cubic Meter MMBTU Rs/MMBTU Rs/MMBTU
1st 0-100 0 - 3.5494 100 - 100
2nd 101-300 3.5495 - 10.6482 200 - 200
3rd 301-500 10.6483 - 17.747 500 - 500
501-700 17.7471 - 24.8458 500 - 500
Bulk Domestic 500 - 500
B. Commercial Consumer 600 - 600
C. Industry including Captive 460 50 510
D. Power (WAPDA/KESC) 460 100 560
E. Independent Power Plants (IPPs) 460 100 560
F. Cement 700 - 700
G. CNG
Zone-1 (KPK, Baluchistan & Potohar Region 618.5 263.6 882.1
Zone-2 (Sindh & Punjab (Excluding Potohar)) 618.5 200 818.5
H. Fertilizer-Feed Stock
Old Plants 116.3 197 313.3
New Plants/Addl. Volume for BMR 60.7 - 60.7
I. Direct Sales to WAPDA
Kandhkot/Sara/Sui/Mari to Guddu 460 100 560
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Source: OGRA
20. Diversion of Gas from Industrial to Power Sector
• Gas is being supplied to Power Sector as per
commitments of gas supply agreements.
• During Energy Conference held in April 2012, it was
decided to divert 207 mmcfd gas to Power Sector till
September 2012 to address the severe electricity
shortfall during summer.
• The gas was diverted from Fertilizer Industry from
SNGPL system.
• However, the general Industry has agreement of gas
supplies on nine months basis and will run on alternate
fuels during winters.
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21. Impact of Diversion of Gas from
Industrial to Power Sector
Power Industrial
Sector Sector
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22. Impact of Diversion of Gas from Industrial to Power
Sector
• Depleting gas • Lack of committed • 90% industry
Fertilizer Industry
allocation (504 to gas supply causing dependent on CPP
Textile Industry
Power Sector
337 BCF) huge production • $ 14 billion
• Higher losses (2.7 million exports in 2011-12
dependence on tons) • Gas cuts causing
imported furnace • Import of 30% redundant
oil ($ 7 billion) fertilizers (Rs. 140 production
• High cost of billion) capacity
electricity & tariffs • A highly leveraged • 15 million
(Rs. 16/- per unit) industry (Rs. 150 employed workers
• Circular debt (Rs. billion)
300 billion +)
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23. Issues in Gas Sector
• Natural decline in production of existing fields
• Heavy reliance on gas because of policy distortion
• Delays in import projects – LNG, IP, LPG
• Delays in linking new discovered fields with the supply
network
• Massive and uneconomic expansion of distribution
network in domestic sector
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24. Issues in Gas Sector
• Unattractive economic and financial returns for the
exploration companies
• Pricing of competing fuels
• Theft, sabotage and UFG
• Circular debt
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25. Economic Evaluation of Natural Gas Use
• International
Resource
Pakistan Group + Asian
Development
Integrated Energy Bank +
Model Energy Wing
of Planning
Commission
Model to
examine the • Setting up
economic reference
scenario for
impacts of studying the
changing gas energy mix of
Pakistan
priority
Gas has a higher
economic value • Simulation,
for fertilizer assessment
production and
conclusion
compared to
power sector
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26. Recommendations
Expediting Import
of Gas & Gas
Exploration
No Gas
Allocation to
Inefficient Power
Plants
Performance
Audit of SSGC &
SNGPL viz-a-viz
Gas Allocation
Policy
Strict
Adherence to
Prioritization
of Gas
Allocations
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27. We need an all-inclusive policy that
revitalizes every sector of the economy,
not just a few individuals or industrial
groups. Fortunately, we have the solution
to the present energy crisis. We only
need our decision makers to take the
right step now, before it is too late !
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I am indebted to my sponsor DS Javaid Iqbal Sb who not only guided me but also clarified certain concepts.
Sequence of presentation would be that I ll first highlight the issue at hand; its brief details; how and when it began; a holistic picture of the issue; associated problems; analysis of the present situation; results obtained so far and based on those results the future scenarios, followed by Conclusion substantiated by certain Studies carried out. I ll then present few recommendations and then of course Q&As
Now that refers to the Catch 22 situation whereby the Govt either cannot or is not able to avoid the problem because of contradictory constraints. These are such situations in which solving one part of the problem only creates another problem which ultimately leads back to the original problem. In Persian its Na jayeraftan, napaye Mandan !This term was coined by Joseph Heller in his novel catch 22
The short timeframe given for the presentation made me source more from the reading material and less from the interaction with concerned stakeholders. Nonetheless the sources are …..
Gas is not found on large scales as that of Oil… only 90 countries of the world have proven reserves of gas and only 5 countries like Russia, Iran, Qatar, Turkmenistan and USA account for 60% of the world’s proven reserves.Use of Natural Gas are many since its popular use from 1930s onwards…Heating, Electricity, as a chemical feedstock in the manufacturing of plastics and other commercially important organic chemicals (i.e. ammonia, urea, phosphates, Teflon, etc.). Natural gas is also used in the manufacturing processof fabrics, glass, steel, paint etc.No uniform international natural gas prices – The price of natural gas varies greatly depending on location, type of gas and nature of end consumer.
This map shows details of major gas fields (more than 100), pipeline network of SSGC and SNGPL.
Power ; General Industry; Domestic, Fertilizer, Transport followed by Commercial. Ideally this distribution should ve been other way round with more gas allocation to the industry rather than domestic or even transport.The above includes about 800 MMCFD gas supply to Power and Fertilizer sectors directly from Mari, Kandhkot and Uch gas field.
If we continue with existing rate of consumption showing on average 6% increase per annum, our local gas resources will be depleted by 2022-23 if we do not explore more sites and/or import gas. Our Demand Supply gap……. This projection includes IP, TAPI Gas pipelines and import of LNG from Qatar.
These sources will be CRUCIAL to our economic survival. SNG is Synthetic Natural Gas as a substitute for natural gas…
Before 2005 there was no policy for according priority to gas allocation for various sectors.. It was arbitrary in nature and haphazard… Gas Sales AgreementsWhen there is a huge demand of power and people feel that generating electricity is cheaper than purchasing it, captive power plants are made.
Aik ANAR 100 Bemaar !
Industry Bias is evident from the Gas Sale prices structure ! Cess is levied under Gas infrastructure Development Cess Act 2011.
Besides committed gas supply to the power sector, in the aftermath of worst energy crises during early this year led to the holding of Energy Conference…. All stakeholders and Provinces were present….. Despite strong reservations of MPNR, it acted upon the decision….
Although final data and statistics are yet to be released for showing any Improvement in Electricity generation from additional 207mmcfd by diversion from Fertilizer sector, yet we do have some provisional figures which show slight improvement in e generation and lesser imports of furnace oil from May-Sept 2012. However on the other side, our fertilizer industry is facing severe problems and is now on the verge of bankruptcy as informed by the fertilizer sector ppl… APTMA is also raising hue n cry as they r short of gas for their cpps… the industrial production related to gas have also made complaints to MPNR.
A leveraged industry is the one which has the largest debt to equity ratio…
Theses are the issues which we need to keep in mind while discussing the gas allocation strategy !
UFG is Unaccounted For GAS; this is the difference between gas sales billed and gas sendout
The actual results of the instant issue of diversion are yet to be computed and analysed, however, Last year Energy Wing of the PC in collaboration with ….. Carried out a study with the aim to determine the economic evaluation of natural gas use. The purpose was to examine the economic impacts of changing gas priority betwn fertilizer feedstock and power generation…
Even the 207 mmcfd allocated gas could not be used fully by the power plants on account of their inefficiency…Why I put these recommendations in concentric circles is the need to adopt these as a package and not by piecemeal. It wont be of any use if either one or 2 are adopted and rest are overlooked; these all are interlinked and can be effective only if adopted in toto.