SNGPL responsible for shortfall in urea production

Fertilizer plants getting gas from Sui Northern Gas Pipeline Limited (SNGPL) witnessed yet another year of dismal performance due to unprecedented cut in gas supply.  As against a name plate capacity of over 2.2 million tons, these plants produced only 256,500 tons of urea during calendar year 2012, which is lowest ever capacity utilization of 11%  by these plants in the history of Pakistan.

Collectively, urea production in the country was also very dismal as the fertilizer sector produced 4.1 million tons of urea as against an installed capacity of 6.9 million tons. This was even lower than a production 4.8 million tons achieved during 2011.

Fertilizer sector has been witnessing a steep fall in its production as it produced 5 million tons of urea in 2009 against a capacity of 5 million, 5.15 million tons against 5.6 million tons of capacity in 2010, 4.9 million tons against 6.9 million tons capacity in 2011 and finally 4.1 million tons against the total production capacity of 6.9 million tons in 2012.  

Currently, all the four fertilizer plants getting gas from SNGPL are facing a complete shutdown. These are Pakarab, Dawood Hercules, Engro’s new plant and Agritech, which remained the main victims of the gas load management plan being followed by gas marketing companies. 

Year 2011 and 2012 have been the worst years for fertilizer sector as instead of providing gas to local fertilizer plants to produce economical and affordable urea domestically, the government preferred to import Urea by spending a hefty amount of over US$ 1 billion from precious foreign exchange.

Despite the unprecedented gas curtailment over the last two years, domestic urea manufacturing plants have provided Rs365 billion benefit to the farmers over the last 5 years, by keeping local urea prices significantly below international levels.

This also negates the general perception that Fertilizer manufacturers are paid huge subsidy by the Government of Pakistan in the form of reduced feed gas prices. This subsidy is not for the manufacturers, but is in fact passed on to the farmer via reduced prices.

 Based on current feed and fuel gas prices, subsidy per bag of urea works out to be Rs228 per bag. In essence if Government subsidy on gas price was taken away, urea prices would only increase by Rs228 per bag.

On the other hand the difference between price of domestic and international urea is more than Rs1,000 per bag. Therefore, not only the fertilizer industry passes on the advantage of lower food gas to the farmers, the industry also pays huge taxes to the government.

One of the factors responsible for the price increase is curtailment of gas supply as the Government failed in honoring gas supply agreement with the fertilizer manufacturers despite the fact that industry has recently invested $2.3 billion in the country based on the government approved policy designed to encourage investment in the sector.

Ironically not only fertilizer plants who suffered huge losses due to gas curtailment but the Government has also incurred significant losses by importing urea worth over $ 1 billion and providing subsidy of over Rs50 billion on imported urea in the last 2 years.

The policy planners failed in realizing that agriculture contributes around 25% to the GDP of Pakistan and also is the raw material supplier to two large scale industries, Textiles and Sugar. Fertilizer industry plays an important role in achieving food security. The decline in urea production poses a severe threat as the country might miss its agriculture and export targets.

Pakistan: Mystery behind unexploited Thar coal

It was in 1992 that the Geological Survey of Pakistan discovered huge deposits of coal - the second largest in the world - in Tharparkar District, Sindh. Thar coal field is estimated to have reserves of 175 billion tons, 68 times higher than Pakistan’s total gas reserves.

Thar coal has been declared lignite type, spreads nearly 10,600 square kilometers, with power generation potential of 100,000 MW consuming 536 million tons a year. Experts often say that development of the Thar Coal is the only viable long-term solution for meeting energy demands of the country.

Since price of crude oil is likely to hover around US$100/barrel, the only way out for energy starved Pakistan is to convert the existing power generation units from furnace oil to coal. On a fast track basis — in three to five years — Pakistan’s entire power generation of steam-based power plants can be switched over to coal, saving the country over $10 billion annually at current oil prices.

A visionary approach can wipe out Pakistan’s entire debt in 10 years. However, if we do not move fast, a $200 a barrel of oil price will bankrupt Pakistan and huge civil unrest will prevail. The CWS technology has reached a level where a plasma gasifier can convert the coal to high BTU brown gas for use in gas turbines and soon in large stationary engines.

Pakistan’s leading scientist, Dr Mubarakmand has said that coal reserves are also available in powder form under water and Pakistan could produce 50,000 megawatt electricity and 100 million barrel diesel just through the gasification of these reserves.

Large reserves of coal in Thar can help generate energy to save billions of dollars spent on import of oil. Thar Coal Project which has the potential to change the energy landscape of Pakistan continues to move slowly, thanks to country’s economic managers.There is a perception vested interests are out to ensure it does not happen.

One of the problems is that Thar Coal project needs investment of billions of dollars for infrastructure and development of the field, and the government instead of relying on local talent and funds wants to give contract to aliens giving overriding consideration to personal over national interest. 

They say Pakistan is endowed with enormous natural resources and minerals, if explored and utilized properly; the country can become a self-reliant country and get rid of dependency syndrome. Weak economy, technical resource constraints coupled with flawed decisions of the inept governments have brought the country to the present dismal position.

Given the prohibitive cost of fossil oil, meeting energy needs has become a challenge for both developed and developing countries; and to keep the wheels of industry going every country is obliged to keep this subject on the top of its agenda.

Pakistan is endowed with enormous reserves of coal in Thar, Lakhra and other places, but no serious effort has been made to exploit these coal reserves and establish the coal-fired power plants. It is true there are financial constraints and international pressures on installation of nuclear reactors and generation of electricity. The government should expedite the development of Thar Coal project, which involves much less investment as compared with large reserves. 

Dr Mubarakmand assured that the difficulties in the way of the utilization of Thar coal would be removed to accomplish the task within stipulated time. The project "Creation of New Processing Facilities for handling and purification of Coal Gas (HPCG) produced by underground coal gasification" was approved in the CDWP meeting held on April 30, 2009. The aim of the project was to create new processing facility for handling and purification of coal gas by underground coal gasification in Tharparkar. 

While Dr Mubarakmand insist on coal gasification rather than any other type of mining or establishing mine-mouth power plants various controversies have brewed up on the use of Thar coal as a fuel for Pakistan’s power generation needs instead of furnace oil and natural gas.

Coal has the following basic values for consideration: volatile matter, which is the igniter for the fixed carbon in the coal, the ash content, the sulphur content and, lastly, the water content. Experts say that water within the coal would soon evaporate in the hot season at Thar and turn the coal to powder and dust. The volatile matter will evaporate as well and reduce the thermal value by at least 10 per cent.

Assuming, the coal reaches the power plant, about two million gallons a day of fresh sweet water will be needed to keep it cool for seven-day storage of a 300MW plant. Considering all facts, the only solution is to convert the coal to coal water slurry — a process now perfected by Zheijang University in China and in use in over 100 locations — at the mine and transport the slurry to Sindh’s and Punjab’s existing and new power plants by pipeline, thus saving road from transporting the fuel.

A report has been published in local media that certain quarters are working on selling Thar coal to India. While no one can overlook this probability, experts say Thar coal seams extent into India and if it wants to exploit it there is no need to negotiate with Pakistan. As such coal produced in India is of much superior quality and the country has coal-based power plants.

One has to believe in the rumors that oil lobby is deadly against using coal for power generation. The critics often say that people related with oil import make billions of dollars. These statements get some credibility if one looks at short shipments and procurement from specific suppliers.

It also on record that every year a huge quantity of oil is pilfered from oil installation area in Shireen Jinnah Colony in Karachi, provincial capital and port city of Sindh and pipelines connecting Karachi port with Mahmoodkot oil storage facilities located near Lahore, provincial capital of Punjab.

Pakistan: Coal for Power Generation Coal is a valuable and plentiful natural global resource. Not only does coal provide electricity, it is also an essential fuel for steel and cement production, and other industrial activities. World coal consumption was about 7.25 billion tones in 2010 and is expected to increase 48 per cent to 9.05 billion tones by 2030. Total world coal production reached a record level of 7,678 million tons in 2011, increasing by 6.6 per cent over 2010. Worldwide, lignite production rose by 5.9 per cent to 1041 million tons in 2011, reaching a level not seen since 1990. OECD lignite production rose by 3.5 per cent to 604 million tons after three years of decline, led by increases in Germany, Poland and Turkey. Non-OECD lignite production rose even more strongly, increasing by 37.5 million tons to a record level of 437 million tons in 2011. Furthermore, coal plants are the most polluting of all power stations and it is identified 1,200 coal plants in planning across 59 countries, with about three-quarters in China and India. The capacity of the new plants adds up to 1,400 GW to global greenhouse gas emissions. China became a net importer of coal in 2009 but the biggest changes are fast-rising imports by Japan, South Korea and Taiwan, which all have large numbers of coal-fired plants but produce virtually no coal of their own. However, Germany, UK and France remain in the top 10 importers, and coal use rose 4 per cent in 2011 in Europe as prices fell and plants due to close under clean air rules use up their allotted running hours. Many developing countries, such as Guatemala, Cambodia, Morocco, Namibia, Senegal and Sri Lanka, and Uzbekistan, are planning new coal-fired plants even when they produce almost no coal at all. USA In 2009, the Energy Information Administration listed 594 coal-fired power plants in the US, down from 645 coal-fired power plants in 2001. Of these 594 plants, 341 were owned by electric utilities, 100 by IPPs, and the remainder by industrial and commercial producers of combined heat and power. For the twelve months ending in June 2012, United States' coal plants produced 1,563,298 gigawatt hours of electricity, or 38.4 per cent of total US electricity production. Currently, more than 9,000 mg of coal-fired generation retired in the United States in 2012 as stricter federal pollution standards move closer to reality and cheaper natural gas makes coal plants less attractive economically. CHINA Most power generated in China comes from coal-fired plants, which makes power producers heavily exposed to the prices of the commodity. In order to keep electricity tariffs stable, the government has asked coal suppliers for years to sell to power firms at contracted prices, which are far below market rates. Presently, China's coal and electricity companies signed deals for a total of 1.87 billion metric tons of coal for 2013, an increase of 55.8 per cent year-on-year. INDIA India's energy mix mainly comprises of coal (52%), oil (32%), gas (10 %), hydro electricity (5 %) and nuclear energy (1 %). Coal continues playing it's dominate role in India's efforts to achieve a targeted 7 to 8 per cent economic growth and its demand is expected to rise 41 per cent in the year ending March 2017. Shortfall in coal supply and low efficient power generation infrastructures are to blame for its constant power shortage especially this July's worst-ever blackout in India's history. The country produced about 578 million tons in 2011. 68.7 per cent of China's electricity comes from coal. The government of India has made various steps to promote clean coal technologies such as underground coal gasification. AUSTRALIA Coal in Australia is mined primarily in Queensland, New South Wales and Victoria. It is used to generate electricity and 54 per cent of the coal mined in Australia is exported, mostly to eastern Asia. During FY 2000-01, 258.5 million tons of coal was mined, and 193.6 million tons exported. Coal also provides about 85 per cent of Australia's electricity production. In FY 2008-09, about 487 million tons coal was mined and 261 million tons exported. INDONESIA Indonesia has introduced bench mark pricing mechanism for its coal since February 2010, and it has implemented for the domestic supplies as well the export market. Indonesian coal producers have shipped approximately 8.236 million tons of coal to China in June, which was 0.24 per cent higher than May 2011 exports. However, Indonesian producers failed to push more coal to India in June. Indonesia's coal production itself expanded from 217 million tons in 2007 to 353 million tons in 2011, nearly doubling in just 4 years, driven primarily by exports. It was estimated that the low prices are challenging for Indonesian small-to-medium coal companies with some of them having stopped production. The government is expected to see a massive increase in power supply this year to 19 coal-fired power plants, with a combined operational capacity of 3,620MW. PAKISTAN In Pakistan, Thar has one of the largest lignite deposits in the world that is 175 billion tones which has the capacity to meet energy requirements of the country for at least 100 years. Pakistan's existing power generation mix with 40 per cent reliance on imported furnace oil is not sustainable as reflected in country's inability to utilize 100 per cent of its power generation capacity due to lack of funds for furnace oil purchase. Development of power plants on imported coal will merely shift reliance from one imported energy source to another with inherent international pricing risks. The government has decided to convert all the existing and new power plants on the specification of Thar Coal versus earlier plan of converting these on imported coal. In a historic decision, the government has also decided that a coal off-take agreement would be signed between Generation Company (GENCO) and Sindh Engro Coal Mining Company (SECMC). The government of Pakistan should finance mining projects in Thar in order to overcome the shortage of electricity in the country. Courtesy: Pakistan & Gulf Economist

 Tapping Pakistan’s massive oil and gas reserves

According to an oilprice.com Energy Intelligence Report Pakistan’s tribal areas are believed to have massive reserves of oil and natural gas—which Pakistani officials have suddenly become very keen to demonstrate. But this is a highly restive, war-torn area where one right move could make all the difference, and one wrong move could ignite a conflict with irreversible consequences.

For now, the area remains unexplored and it was only in 2008 when Pakistani geologists began to study the area in earnest, with the support of the local authorities. The results of this research were collected, processed and digitized in June 2012. The geologists discovered seven new oil and gas seepages during the mapping. The geologists also claim that 11 oil and gas exploration companies have already reserved 16 blocks in Fata.

Geologists say the area, bursting at the seams with gas, is poised to become a ‘new oil state’ whose production could rival Dubai’s in only five years.

The interest is evident from: 1) seventeen (17) companies have initiated operations in Khyber, Orakzai, North and South Waziristan, Peshawar, Kohat, Bannu, Tank and Dera Ismail Khan), 2) Tullow has been active in Pakistan since 1991, but since 2008 it has sought to transfer its Asian licenses to focus on Africa and the Atlantic Margin, 3) other players include Mari Gas Company (Pakistan), HYCARBEX (part of American Energy Group ), Saif Energy (Pakistan), MOL Pakistan Oil and Gas, Orient Petroleum International (Ocean Pakistan/Cayman Islands), ZHEN (China), and others and 4) Oil and Gas Development Company (OGDC) of Pakistan is set to begin exploratory drilling in the area soon.

The report has also talked about Gwadar port. In terms of infrastructure, China has been the chief architect, and investor. China has already invested around $300 million in the deepwater Gwadar Port close to Gulf of Oman.

Construction began in 2002 and the goal was to make this port a transit hub for landlocked countries (Afghanistan and Central Asia) and to boost transit from the Persian Gulf to East Africa. China plans to invest a total of $1.6 billion in the port—so far it’s cost $200 million to build the first three berths, which can handle $2 billion in cargo annually.

Despite its capacity, cargo has been slow to move through this port, largely because it’s not connected to the rest of the country.

Byco a good omen for energy starved Pakistan

Byco’s newly completed oil refinery successfully completed its initial run of about 48 hours and was able to produce on-spec HSFO, HSD and Naphtha. This initial run was conducted during the course of pre-commissioning and commissioning activities.

Following this activity, the new Refinery will shortly be put to continuous 72 hours trial run. This is yet another milestone achieved which is a step forward towards smooth and safe commercial production. It will be the beginning of commercial production from country’s largest oil refinery.

The new refinery with a crude oil processing capacity of 120,000 barrels per day will be the largest in the Country.   Based on full throughput it is expected to produce on annual basis about 1.6 million tons of high sulphur furnace oil (HSFO), 2.4 million tons of high speed diesel (HSD) and 1.1 million tons of motor spirit (MS).

Pakistan faces deficit of these products, which have to be imported. Indigenous production of these products by Byco will help the country in saving huge foreign exchange. 

Byco group has already installed and commissioned the first ever SPM of the country, which is located at approximately 10.5 kilometers into the Arabian Sea, off the Refinery’s Mouza Kund Site, in Balouchistan. 

The SPM facilitate larger sized tankers to take berth and meet the crude oil processing requirement of the two Byco refineries.  

Adviser Asim must tender resignation

Many sector experts were unable to understand sudden and substantial short fall in natural gas availability. 

There were suspicions that gas was being diverted to some ‘privileged group of consumers’ by keeping CNG stations closed for longer duration.

Adviser to the Prime Minister on Petroleum Dr Asim Hussain kept on saying that the government wanted people to use petrol instead on Compressed Natural Gas (CNG) in their vehicles to meet the demand of industrial units. However, consumers’ plea is simple ‘give us a cheap alternative fuel’ because running vehicles on gas and high speed diesel is too punitive.

Ghyas Paracha, Chairman, All Pakistan CNG Association (APCNGA) has opened the Pandora’s Box by making specific allegations against the Adviser and asked him to tender his resignation. The allegations are:

1) Dr Asim Hussain is responsible for the gas crisis which has been created to justify expensive imports of Liquefied Natural Gas (LNG) and setting up LPG air mix plants in the country.

2) Just to ensure that the Captive Power Plants (CPPs) of 112 top rich families in the country continue to get gas; Ministry of Petroleum has created a scenario to shut down CNG stations in Punjab for two month.

3) Gas supply to CNG stations has been suspended to ensure continuous supply of gas to most inefficient CPPs owned by the textile mills, adding, which is in violation of the nine month supply contract with them.

4) The gas supply to CNG stations has been suspended to provide an opportunity to the local agents of international oil suppliers to pocket money through enhanced imports of petrol.

5) Suspension of gas supply of CNG stations was illegal as no load management plan has been approved by the Economic Coordination Committee (ECC).

While the Ministry, Adviser and even SSGC and SNGPL may come up with any justification, one is forced to arrive at the conclusion that there is some connivance between the rulers and ever strong lobby of owners of textile mills. Textile tycoons are famous for taking good care of ruling junta, which is not possible for the owners of CNG stations, except for those owned by ruling elites.

Masses have reasons to believe in the allegations leveled against Dr Asim by Paracha. In the past the sitting Prime Minister Raja Pervaiz Ashraf was also accused of obliging the owners of rental power plants (RPPs), which led to recovery of billions of rupees advanced to the owners of RPPs. The litigation is going on Raja’s name is still on exit control list.

Now the Adviser has two options: 1) submit proof to establish that the allegations leveled against are incorrect or 2) submit his resignation. The prudence demands that Adviser must not remain in this position till he is proved ‘not guilty’.