Electricity generation: There’s plan to disconnect gas supply to industries

ISLAMABAD: Petroleum Division has reportedly prepared a plan to disconnect from February 1, 2021, gas supply to all industries that are currently using it as fuel for the primary purpose of electricity generation for self-consumption, well-informed sources told Business Recorder.

Sharing details, SSGCL and SNGPL are engaged in transmission and distribution/sale of natural gas in the country. Except for a few dedicated gas consumers such as power plants/IPPs and fertilizer plants, gas to all other bulk consumers including power, fertilizer, industry, CNG, cement and residential consumers is supplied through the extensive network of these two gas utility companies.

With the passage of time, gas available for sale with the SSGCL and SNGPL from these areas has decreased due to natural depletion whereas new natural gas discoveries have barely kept pace with the natural depletion and there has been no net increase in the availability of indigenous gas for the last many years.

Comparing natural gas production of last two financial years, a natural depletion of about 9.4% was witnessed which translates into over 400 MMCFD of gas and the same is now not available in the system.

In order to optimally use the scarce available natural gas resource, an exercise was undertaken with respect to assessing the usage of gas by Captive Power Plants (CPPs) both on SSGCL’s and SNGPL’s supply systems.

The details of surveys conducted reveal that the total number of CPPs is 1,211 on the systems of both gas companies, of which 362 are on SNGPL whereas 849 are on SSGCL’s system.

The CPPs with electricity connection are 976, of which 350 CPPs are on SNGPL system while 626 are on SSGCL system. The total number of CPPs, without electricity connections, are 235, of which 12 are on SNGPL system, and 233 on SSGCL system, respectively. The total estimate gas/RLNG consumption of CPPs is 415 MMCFD, of which 205 MMCFD is on SNGPL system whereas 210 MMCFD is on SSGCL system.

The number of CPPs established by export units are 610 of which 236 are on SNGPL system whereas 374 are on SSGCL system. The estimated gas/ RLNG consumption by CPPs of export industry is 290 MMCFD, i.e., 155 MMCFD at SNGPL system and 135 MMCFD on SSGCL system, respectively. The number of CCPs established by non-export industry is 601, of which 126 are on SNGPL and 475 on SSGCL. The estimated gas/RLNG consumption for 1211 CPPs has been calculated at 125 MMCFD, of which 50 MMCFD is on SNGPL system whereas 75 MMCFD is on SSGCL system.

Out of the above total 1,211 CPPs, only 227 (SSGC:159, SNGPL:68) are cogeneration units which not only generate power for self-consumption but also generate heat energy for their industrial use.

SNGPL supplies RLNG to CPPs (non-export) at a monthly Ogra-determined price for LNG whereas similar units in the Sindh, Khyber Pakhtunkhwa and Balochistan operate primarily on system gas supply.

Similarly, the CPPs (Export) receive blended gas/RLNG supply at a tariff of $6.5/MMBTU in Punjab whereas similar units in Sindh, Khyber Pakhtunkhwa and Balochistan operate on system gas supply with an exception of a special arrangement of Rs. 930/MMBTU only for this winter till February 28, 2021.

The comparison of latest revised tariff shows that for captive (general industry) system gas was 1087 per MMBTU and RLNG 1, 225 per MMBTU and for captive (export industry), system gas was 852 per MMBTU and RLNG at Rs 1,040 per MMBTU for November 2020.

Every winter, the demand of the high priority sector i.e., residential consumers increases manifold and gas utilities while the remaining within the available supplies are constrained to exercise load-curtailment programme keeping in view the following priorities: (i) domestic & commercial- first ;(ii) power sector, export oriented industry- second;(iii) general industrial fertilizer and captive power industry-(third) ;(iv) cement including its captive power, CNG sector (fourth) and; (v) CNG – fifth.

According to Petroleum Division, reportedly the gross/installed capacity for power generation in the country is 38,707MW whereas anticipated capacity of power projects in pipeline is 12,464 MW. During FY 2020, against the generation of 27,780MW, the demand peaked at 26,252MW. With sufficient availability of power due to substantial installed generation capacity, the continued supply of precious depleting resources, i.e., natural gas to CPPs, does not appear to be rational as it cannot match the efficiency of gas / RLNG-based IPPs in the national grid.

Accordingly, Petroleum Division has submitted a summary to the Cabinet Committee on Energy (CCoE) recommending the following policy guidelines with respect to supply of gas to industrial units for self-generation of electricity: (i) supply of natural gas shall be discontinued with effect from February 01, 2021 to all industrial units that are currently using it as fuel for the primary purpose of electricity generation for self-consumption; (ii) however, this moratorium / discontinuation of natural gas supply will not apply to those industrial units that are either not connected to the electricity distribution grid; or using it as fuel for the primary purpose of steam generation (co-generation units); or to the extent, and until such time, that they are unable to be fully served by the relevant power distribution company (DISCO) for their electricity requirement or those industrial units that are currently using natural gas as fuel for the primary purpose of electricity generation but are not connected to the national electricity grid shall be actively encouraged and expected to apply for a new connection from the relevant Discos as soon as possible and to be completed no later than December 01, 2021.

This policy will apply to all industries, including those classified as zero-rated / export-oriented, across Pakistan both on gas and RLNG.

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