Closure of CPPs to cause Rs420bn loss to Sui gas firms: officials

ISLAMABAD: At a time when the RLNG consumption has decreased in the country manifold and the decision to switch the industrial sector to national grid from gas-based captive power plants (CPPs) while toeing the direction of IMF will lead to recovery loss of Rs420 billion to the Sui gas companies.

“We get the revenue of Rs420 billion per annum from captive power plants set up for sustainable industrial activities. This is how the industry is currently giving cross-subsidy of Rs100 billion, which is being extended to protected gas consumers,” senior official sources at the Energy Ministry told The News.

“The total number of Captive Power Plants stands at 1,180. In the Sui Southern system, the numbers are at 797 and in Sui Northern jurisdiction, there are 383. The captive power plants are the bulk gas consumers. If they go out of the system, with Rs420 billion loss, the authorities would have to find out new gas consumers which use over 300 mmcfd gas. It is now difficult to sell the product in place of CPPs as gas consumption has gone down. This is quite evident from the line pack pressures that for many times exceeds 5bcf in the main pipeline, putting the whole national gas transmission system in jeopardy.”

More importantly, they said, it will not be possible to continue to extend the Rs100 billion subsidy for protected gas consumers in case CPPs are disconnected from the gas supply. Under this scenario, the government would have to safeguard the protected consumers from the subsidy of the federal budget.

“To discourage the captive power plants from gas use, we have already increased the gas tariff for CPPs by Rs275 per MMBTU to Rs3,000 from 2,750 per MMBTU. From January 2025, it would be further increased by Rs700 to Rs3,700 per MMBTU at par with the ring-fenced price of RLNG.”

More importantly, in a new move, a summary by the Petroleum Division has been sent to ECC for approval of a revised merit order for gas allocation under which gas supply is to be extended to captive power plants at the end of the new merit order along with the CNG sector.

“We have put the CPPs at the end of the list of new merit order for gas allocation and increased gas tariff up to Rs3,000 per MMBTU also for them on the direction of the Fund.”

Meanwhile, the Power Division has intimated the authorities in the Petroleum Division if the captive power plants are banned from getting gas and the whole industrial sector is switched on to the national grid, then it is required to extend 4,000 MW of electricity.

“For this purpose, the Power Division will have to spend Rs20 billion for erecting grid stations of 11KV and 132KW. The 11KV grid station will be completed in 6 months, but 132KV grid stations will take 1.5-2 years to get completed.”