## **Abandoned LPG Air-Mix Project Causes Billions in Losses, Govt Weighs Revival of Chitral Plant**
**ISLAMABAD:** An abandoned liquefied petroleum gas (LPG) air-mix project has resulted in losses worth billions of rupees for **Sui Northern Gas Pipelines Limited (SNGPL)** after equipment, land and related infrastructure were procured but never put into operation.
The issue came under discussion during a recent meeting of the **Economic Coordination Committee (ECC)**, where the **Ministry of Energy (Petroleum Division)** briefed members on the status of the project and options for utilizing the idle assets.
The LPG air-mix initiative was originally approved by the ECC between **2016 and 2018** to provide gas to households in remote and mountainous areas where piped natural gas was either unavailable or economically unviable. The project envisaged the installation of **16 LPG air-mix plants** with an estimated government subsidy of **Rs16.5 billion**.
However, in **2020**, the government decided to discontinue the project due to its high cost and the growing financial burden on gas utilities. At that stage, SNGPL had already purchased equipment, machinery and land for several planned facilities.
According to the Petroleum Division, the matter was presented before the ECC on **March 18, 2020**, proposing either continued implementation with government subsidies or complete abandonment of the project. On **March 25, 2020**, the ECC directed that all plants on which construction had not started should be cancelled.
Later, in **December 2020**, the Petroleum Division sought clarification regarding three proposed plants in **Drosh, Ayun and Chitral**, where SNGPL had already acquired land and equipment. The ECC instructed the company to abandon the projects and dispose of the assets through an open and transparent process while minimizing financial losses.
SNGPL subsequently floated tenders on three occasions to sell the equipment, but no serious bids were received. While the disposal of land remains pending with the **Board of Revenue, Khyber Pakhtunkhwa**, the imported equipment continues to remain unused in storage facilities in Lahore.
The Petroleum Division informed the ECC that SNGPL has estimated **Rs60 million** for conducting an operational health assessment of the idle equipment before any future use.
Initially, the project’s capital cost for the Chitral plant was estimated at **Rs2.775 billion** over a 15-year period, including **Rs943 million** for plant construction, land acquisition and civil works, and **Rs1.832 billion** for the gas distribution network designed to serve approximately **12,000 consumers**.
Financial projections at the time estimated an annual revenue shortfall of **Rs419 million** in the first year, increasing to **Rs815 million** by the sixth year. The cost of producing synthetic natural gas was calculated at around **Rs25,000 per million British thermal units (mmBtu)** during the first year of operations.
The Petroleum Division has now proposed a revised and more cost-effective model by optimizing project design, revising technical assumptions and utilizing existing company resources.
Under the revised proposal, the capital cost could be reduced to **Rs1.779 billion** through lower civil construction expenses and the use of surplus pipeline material already available with SNGPL.
The ministry also suggested reducing operating costs by lowering **unaccounted-for-gas (UFG)** losses based on operational experience from similar facilities in Gilgit, along with rationalizing fuel and power expenses.
These measures are expected to reduce the annual revenue shortfall to **Rs119 million** in the first year, increasing to **Rs432 million** by the sixth year. Similarly, the production cost of synthetic natural gas could decline significantly to **Rs7,229 per mmBtu**, based on an initial customer base of **2,000 consumers**.
To make productive use of the already procured equipment, the Petroleum Division has recommended installing **one LPG air-mix plant in Chitral**, subject to a satisfactory health assessment of the stored equipment and technical approval from the original vendor.
Story by Zafar Bhutta
