SNGPL fears disruption in LNG supply chain over lack of policy guidelines

LAHORE: The Sui Northern Gas Pipelines Ltd (SNGPL) fears disruption in supply chain of liquefied natural gas (LNG) in the absence of policy guidelines by Ministry of Industries for RLNG allocation to fertiliser manufacturing plants beyond January 31, 2019.

In this backdrop, and delay in subsidy payments by the government, the gas utility has asked fertiliser plants to make full payment of RLNG in advance on daily basis to ensure continuous supply of gas.

As per correspondence between SNGPL, fertiliser manufacturers, and Ministry of Industries, SNGPL has informed the Ministries of Energy and Industries its inability to continue gas supply to fertiliser plants running on RLNG, as no formal approval by the Economic Coordination Committee (ECC) and federal cabinet has been granted for extending the arrangement beyond January 2019.

Earlier, ECC approved running these plants till further orders in its meeting held on January 1, 2019 and asked the Ministry of Industries to submit comprehensive urea plan 2019 for formal decision to continue running the plants to avoid urea shortage.

However, SNGPL has raised alarm stating that in the absence of clear policy guidelines, the utility was constrained to suspend supply to urea plants. Moreover, SNGPL also raised concerns on the pending subsidy payment of Rs4 billion from September 2018 to January 2019. The gas utility said that lack of liquidity made it difficult to meet its upstream payment obligations.

Fertilizer Manufacturers Advisory Council (FMPAC), through a letter, also urged the Ministry of Industries to expedite necessary approvals from the competent authorities so operations of fertiliser plants could be continued to avoid recurring urea shortages.

Since the formation of the new government in August 2018, industry sources observed that issues relating to urea manufacturing could not be settled, as all matters were being managed on adhoc basis. “Consequently, shortage of urea fertiliser erupts almost every month due to one reason or the other,” sources said.

A FMPAC official said, “We were running our plants in the month of February with the confidence that the ministry will surely seek all necessary approvals, but things have been delayed due to reasons known to relevant quarters.”

The official lamented that the delay was despite the fact that the ECC had asked the Ministry of Industries in January to prepare and present a plan for 2019.

Immediate challenge posed to industry has been pending decision about continuity of RLNG policy beyond January 2019.

Without ECC approval, SNGPL would not be able to claim subsidy from February onward to keep it on its books.

The last Fertiliser Review Committee (FRC) meeting held on January 14, 2019 also stressed continuous gas supply to fertiliser plants running on RLNG-gas mix throughout the year 2019 to meet urea demand via local production.

It was also highlighted that closure of these plants would result in considerable shortage of urea, leading to costly imports and market instability.

As no policy exists, SNGPL through letter written to fertiliser plants was pressing to pay the balance amount pertaining to rate over and above Rs782/mmbtu, as the subsidy has not be received by them.

The Ministry of Industries has also been requested to play its role in release of the subsidy amount to SNGPL to facilitate their upstream payment obligation, thus ensuring RLNG supply chain.

FMPAC too has asked the Ministry of Industries that instructions be issued to SNGPL for supply of gas under the current modalities beyond January 31, 2019 in order to ensure adequate supply of urea to the farmers.