Fertilizer industry facing severe gas curtailment

STAFF REPORT LHR: Worlds largest single-train urea production plant is facing a serious financial crisis while the gas curtailment has forced it to reschedule its Rs65 billion debt payments. According to sources, the gas curtailment to the fertilizer industry in Pakistan has led to massive financial burden on the government, besides resulting in losses running into billions of rupees on domestic urea plants.

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“The gas curtailment to domestic urea plants has cost about $566 million on account of urea import during the current calendar year, besides increasing the losses of urea manufacturers,” the sources added.

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The four gas-fed fertilizer plants of Sui Northern Gas Pipeline Limited (SNGPL) received far less gas during the outgoing year against the already curtailed supplies in 2011. Therefore, even though there is a sufficient capacity in the country to meet the domestic demand, about 1.4 million tons of urea had to be imported to fill the gap.

Engro won its gas allocation in 2006 in an open and transparent bidding process, and entered into gas supply contract with effectively a sovereign guarantee and an incentives gas price.

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According to the industry sources, while the project was being initiated, the government had committed 100 million cubic feet per day (mmcfd) gas for the Daharki plant and after the governments assurance of gas supply, Engro had set up the plant with a production capacity of 3,850 tons per day.

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