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Monday December 23, 2024

Cabinet to review gas shortfall mitigation plan today

By Khalid Mustafa
December 29, 2020

ISLAMABAD: The top leadership of Petroleum Division (PD) will sensitize the federal cabinet that meets today (Tuesday) about the ongoing gas crisis and its gas shortfall mitigation plan, apprising it that RLNG supply to the power sector for January 2021 will be curtailed to 200 mmcfd (million cubic feet per day) against the demand of 240 mmcfd.

The authorities on Monday stopped the RLNG supply indefinitely to the CNG sector from today (Monday) and for captive power plants for general industry, it has already been closed. Earlier, the CNG sector was closed for some days in a week but now it has been shut down for an indefinite period.

The country is going through its second severe cold wave. And another severe cold wave is projected in January but in case the weather improves, the curtailment of 40mmcfd to the power sector will be restored first, followed by other curtailments in reverse order.

The gas shortfall mitigation plan submitted to the federal cabinet mentions that the Petroleum Division has identified at least 100mmcfd in the SSGC system demand that could be rationalized.

First, the local gas allocation and Gas Supply Agreement for Fauji Fertilizer Bin Qasim plant expires on December 31, 2020 and the plant will close for annual shutdown in January, 2021. Since any continued supply will require new allocation by the cabinet, the determination of whether subsidized gas should be continued or not needs to be decided.

The supply can be restored earliest by end of January 2021 when the plant completes the maintenance shutdown. This will reduce demand in the SSGC system by about 60 mmcfd. Second, there is no agreement with Karachi Electric to be given 110mmcfd of LNG, a reduction to 70mmcfd implemented since Dec 17, 2020 will continue in January 2021. The KE has replaced this generation with other sources, pursuant to a previous decision of the cabinet. The PLL is negotiating with KE for supply of 150 mmcfd of LNG from April 2021 onwards and supplies will be regularized from April 2021.

The K-Electric will continue to be provided 70 mmcfd gas in January, against 110 mmcfd supplied until recently (and was in the original plan) without a contract and under a court order to supply on basis of availability. This will not result in any loadshedding in Karachi, as informed by KE, since it can easily replace this generation, January being its low demand month.

The Petroleum Division will also hold a committee, headed by Deputy Chairman Planning Commission, to find out responsible for failure to use the 150 mmcfd excess capacity available with PGPL LNG terminal, arguing that any excess capacity was to be operated on a revenue sharing model with the government. The amount of sharing was to be determined by a committee headed by Deputy Chairman Planning Commission. The cabinet will be told that the report of the committee is still awaited despite repeated reminders by the Petroleum Division.

Consequently, 150 mmcfd additional capacity available with the PGPCL Terminal could not be realized because of non-finalization of terms of revenue sharing. In anticipation of a scenario where the government entities might wish to utilize capacity beyond 1,200 mmcfd for themselves, and after clearance from the Sindh government to start work on the 17km pipeline in third week of October, Pakistan LNG Ltd (PLL) issued tenders for three spot cargoes instead of four (with four being sufficient for its contracted capacity of 1,200mmcff) for January, 2021. The PLL was able to secure three LNG cargoes at good prices.

Under the mitigation plant, a fourth cargo scheduled for December 30, 2020 (to be used for January) was moved a few days to complete the slate of 12 cargoes for January, 2021 at the lowest ever average cost of $6.34 per MMBTU DES price for any January on record.

There were two additional cargoes available in the first half of January, 2021 but at quoted prices that were more than double the average, so they were not awarded. Since power for captive plants and general industry was next in line to be curtailed after CNG, if the additional cargoes were awarded, the marginal cost of power generated from this additional LNG would have been significantly more than the cost of power from RFO.