Inside Financial Markets

Ministry wants Engro to continue getting gas from Mari

Ministry wants Engro to continue getting gas from Mari
ISLAMABAD: The Ministry of Petroleum and Natural Resources is looking to convince the country’s economic decision-making body to continue gas supply to Engro Fertilizers – a subsidiary of conglomerate Engro Corporation – through the Mari field.

The proposed plan comes after the arrangement to supply gas to the fertiliser manufacturer lapsed on December 21, 2015.

Gas supply to be diverted from Engro to Guddu plant

In a move meant to support the agriculture sector, the ministry of petroleum has moved the summary to the Economic Coordination Committee (ECC), arguing that since the gas belongs to Mari-based fertiliser plants, it should continue to support the country’s urea production.

The move comes a month after it was reported that gas would be diverted from Engro Fertilizers to the Guddu power plant, keeping in mind electricity shortage in the country. However, Shahid Khaqan Abbasi, the petroleum minister, insisted that Engro would be supplied gas through other means.

Now, the ministry, in its summary to the ECC, has said that under the fertiliser policy 2001, the government had dedicated a shallow reservoir of Mari gas field to the fertiliser industry. The deep reservoir has been dedicated for the power sector as it was suitable for electricity generation, it added.

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The petroleum ministry said that 100 mmcfd gas from Mari deep was allocated and dedicated to new power projects near Mari gas field identified by the Ministry of Water and Power in accordance with the approved power policy. Later, the water and power ministry made this gas available to the Foundation Power Company Deharki (FPCDL) and Star Power Generation (SPGL) in the ratio of 60:40 mmcfd, respectively.

Subsequently, the gas allocation volume was enhanced up to 65 mmcfd and 44 mmcfd to FPCDL and SPGL, respectively, pursuant to the ECC decision.

However, SPGL, to date, has been unable to commence construction of its power plant, while failing to achieve financial close as well. Resultantly, it was added, due to the breach of the gas supply agreement with Mari, the ECC allocated this gas to SNGPL for onward supply to thermal power station Guddu for a period of two years.

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Supply of gas commenced on March 10, 2012 before the allocation expired on March 9, 2014. Despite the expiry, Mari Petroleum has continued to supply 44 mmcfd of gas to the Guddu power station. However, gas offtake has remained till date, stated the petroleum ministry.

Ahsan Baig

The Canadian Securities Institute


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Inside Financial Markets was a joint publication of Pakistan Stock Exchange (PSX)and Society of Technical Analysts Pakistan (STAP)