Fertiliser plants shut for 30 days in winter on gas supply shortage

LAHORE: The short supply of urea fertiliser on the back of irregular domestic manufacturing due to erratic and short supply of natural gas may lead to a widening gap of the essential agricultural input in March, latest official data suggests.

According to National Fertiliser Development Centre, urea stock levels in March 2019 are estimated at 31,000 tons only against buffer stock requirement of 200,000 tons. In February, production of urea touched the lowest levels in ongoing winter month, as it faltered to 350,000 tons against this winter’s monthly average of 473,000 tons.

Urea production in Rabi starting from October 2018 peaked to 559,000 tons in October. However, from December, it started to decline steeply as availability of natural gas to fertiliser plants started to squeeze.

From 512,000 tons of urea produced in December 2018, its manufacturing dipped to 460,000 tons in January due to closure of LNG import terminals on one reason or another.

Keeping in view irregular functioning of fertiliser plants, shortage of urea is feared to aggravate further.

Commenting on deteriorating urea stock, sources said inventory of 31,000 tons in March was like nothing across all four provinces and Azad Jammu Kashmir. Apart from ill-fated urea plants on Sui Northern Gas Pipelines Ltd (SNGPL) network, it was learnt that Engro’s new plant also faced closure due to technical issue.

Even plants on Sui Southern Gas Company (SSGC) face the issue of gas curtailment or low pressure and this problem unfortunately continues to pose a risk to the viability of the whole fertiliser industry.

Diversion of gas to other consumers during winter season leads to decline in production. Only in the month of February, urea production was less by 0.7 million bags of 50kg each. “How can the market cope with this huge gap between demand and supply,” sources asked.

Despite federal government’s clear policy and issuance of necessary instructions to gas utility coupled with Economic Coordination Committee’s (ECC) decision to run urea plants on continuous basis, gas supply to urea manufacturing remains erratic during the winter months, especially during December to February.

Urea prices during February again inched to Rs1,900/50kg bag in retail markets due to supply disruption against Rs1,800/bag.

Two plants on SNGPL network faced closure for about a week—from February 18 to February 25, 2019. This closure was due to SNGPL’s insistence to either clear subsidy by government or plants pay 100 percent LNG payments, which is in fact contrary to the ECC decision, sources add.

In this latest case, delay by government to pay approved subsidy to another government entity---SNGPL, caused gas shutdown of urea manufacturing plants.

The intermitted production of urea plants in winter led to production loss of approximate 1.5 million bags. Resultantly, urea stocks in the country plummeted to severely low level.

Urea fertiliser is considered an import nutrient for increasing productivity of the farming sector, as it constitutes around two-third of the total fertiliser demand in the country. However, gas curtailment remains a concern for local industry despite several initiatives taken by the present government.

It may be noted that SNGPL resorted to cutting gas supply to fertiliser plants by mid February despite clear ECC instructions for uninterrupted running of plants. This led to disruption in urea manufacturing.

Supply of natural gas to Fatima Fertilizer and Agritech plants remained irregular due to one reason or another.

Successive interventions by advisor Razzak Dawood, and Finance Minister Asad Umar helped streamlining gas supply and resultant resumption of fertiliser plants.

Sources said the government should take concrete steps to ensure smooth supply to fertiliser manufacturing plants with a view to fulfilling demand of the agriculture sector. It was only possible through clear cut policy and a well thought out strategy for its implementation.