Loot sale of gas in Pakistan..

Society Pakistan & World Affairs
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  1. In last one decade our reliance on gas in the energy mix of the country has gone up from around 30% to 47%. If the deferential of cost between the natural gas and other energy sources remains the same this figure will go much higher.

  2. While the prices of petroleum, diesel, furnace oil, coal, electricity are transferred to the consumers immediately.. somehow GOP has not increased the price of gas to the consumers with the same proportion. For example the cost per unit for captive plant operators was Rs. 4/ per unit when the US$ was at 60 Rs. parity some 4 years ago (around 6.6 cents).. today at Rs 90 parity it is around Rs 4.5/ per unit (5 cents). In fact for captive power plant operators it has come down in last 4 years.

  3. GOP is subsidizing fertilizer manufacturing sector in shape of gas prices in anticipation that it will enable them to sell fertilizer to the growers at a cheap rate. Fertilizer manufacturers are selling fertilizer at import substitution parity today (international price) and all this subsidy is resulting in hefty profits for the fertilizer manufacturers. Fatima Fertilizer made a gross profit of Rs 4.6 billion on a sale of Rs 7.3 billion for quarter ending Sep 30 2011 (63% gross margin), while PakArab Fertilizer made a gross profit of Rs. 3.7 billion on a sale of Rs. 5.4 billion (69% gross margin) mainly due to subsidized gas. This margin will increase in the quarter which ended on 31st December due to phenomenal increase in the increase of fertilizer prices in the domestic market. This profit does not include the black marketing profit which goes directly in the management pockets.. free of tax payment. Bottom line is all this subsidized gas is going in the pocket of the owners of the fertilizer factories and practically nothing is being transferred to the growers.. GOP is just using grower subsidy for political hype to make fertilizer industry to make windfall profits..
    http://www.fatima-group.com/index.php

  4. GOP is paying around 350 billion rupees to bridge losses of Pepco. Another 300/400 billlion rupees is being spent on subsidizing gas. Just imagine if we start buying gas from Iran and start selling it at present prevailing prices.. This loss will come near 1000 billion rupees. From where are we going to find money to bridge this gap. We cry about military expenditure of around Rs. 150 billion and think this expenditure has destroyed our economy. Just compare it with the power sector loss.

Gas prices must be increase at least 100% immediately if we want to put any rationale in our energy policy. Gas subsidy should be taken away from fertilizer sector immediately. It will have no effect on our agriculture sector as they are already buying fertilizer at import substitution prices. Gas prices should be increased immediately for the industry as most of the usage of gas in industrial sector is for power generation to produce electricity for Rs. 4.5/ per unit. This gives undue advantage to the industry using gas for power generation compared to other industry. Gas prices should be increased for consumers/CNG users to a rationale level. This loot sale of gas produced in Pakistan must come to an immediate halt, and this huge resource should be diverted to uplift social sectors such as education/health/infra structure for the country..

But the question is who will do what is necessary. When GOP increases the prices for gas there is a big agitation in the country. Can any democratically elected government take harsh decision for the ultimate benefit of the country.. Answer probably is a big NO..

I think we should try to brain storm in this forum.. after understanding the actual problem..

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Re: Loot sale of gas in Pakistan..

^^ Bad timing for me, i love to take part in such discussion but i need to travel for few days, i hope when i am back the topic is still up and not lost..

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i agree with you fully yazdi… the unplanned and totally haphazard conversion of all energy to GAS resulted in overdependence on gas and now gas is finished…

just a rumour to share…Fatima Group ‘gift’ hefty amounts to Gillani… :hehe:

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Re: Loot sale of gas in Pakistan..

CNG is also a big factor. CNG was promoted a lot during Musharraf's time without taking into account the shortage of Gas in the country (bad planning). The policy of promoting CNG as a fuel has even continued in this government resulting in this fiasco.

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My own group has several captive power plants. On personal level it's a big subsidy for our businesses. it's not about individuals anymore. If we destroy our country to an extent that our children can not live in the country anymore what's the use of all these huge businesses. Same goes for Mr. Fawad Mukhtar of Fatima Group.. or Mr. Hussain Dawood (Engro + Dawood Hurcules). I hope they understand that looting the country dry to this extent will not be beneficial for them in the long run. They should voluntarily ask the government to withdraw gas subsidy from the fertilizer sector.. as this is giving zero benefit to the grower/common man..

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isn't that a tad bit too unrealistic of an expectation???

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The price deferential between gas being supplied to CNG and Fertilizer is approximately 1:6.. CNG is not that of a huge problem although the price deferential between gas/diesel must be reduced to discourage CNG. It should be done step by step as stopping CNG to 4 million vehicle owners in the country can become a big issue for any political government. Bottom line is CNG to vehicle owner is not even 5% of the over all gas crisis..

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What benefit does gas subsidy to fertilizer fertilizer sector give to a common man.. fertilizer is already being sold in the market at import substitution prices. Under the circumstances any sane government who are not getting hefty amounts from the industrialist will immediately do that. If you want to provide subsidy to the farmer on fertilizer.. give it directly to the farmer instead of giving it the producers of fertilizers..

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i know… i was talking about industrialists voluntarily giving up money :hehe:

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^^^
If they don't give up voluntarily they will damage the country to an extent that their children will not be able to live in this country. In that eventual case they will lose everything..!!!!

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^^^

Kia unke bache Pakistan main hain? :hmmm:

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Yes the problem is with the private business ventures, but who allowed and/o allocated gas to these fertilizer units, if i am not wrong then i guess some 33k of cubic feet of gas is required to produce a ton ammonia nitrate and we have fertilizer companies who install upto 500,000 tons of the same..no do the math and see how much gas shall be burned as a feedstock to produce this much ( this is the installed capacity of Fatima Fertilizer)...

Now here few issues or points and something for us to learn and think about, i will not talk about the subsidies or anything else, Yazdi have rightly discussed that already..my point is, why the hell govt agreed to provide gas to these units to start with>>>>> some time it is because govt want FDI in Pakistan and yes, The Fatima Fertilizer and many other oil-based Power generating units, telecom companies have been instrumental in getting FDI in Pakistan... but that have cost us more than it have benefited us, the gas crisis can be solved if the govt stop providing gas to these units.. remember fertilizer companies do not use gas as fuel but as a product for to produce it...

Yes this will be a set back for our fertilizer producing industry, but it won't have huge impact on the the price of the fertlizer.. we still be importing it... i urge the investors of Pakistan to invest in the fertilizer producing Industry in Alegria and Qatar and Iran and Turkumanistan etc... where gas is ample and they can produce and send the end product to Pakistan.. where as the same gas can be used for other industry who use it as fuel.. it will solve the issue of gas to some extend...

I'll try to sneak in again to add more

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Fatima group has an investment of more than RS.100 billion in Pakistan. Hussain Dawood’s investments exceed Rs.200 billion. You can be assured that their next seven generations will not leave pakistan.

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There is a guarantee to supply the gas.. there is no guarantee to supply the gas at dirt cheap throw away prices which is giving these fertilizer factories 70% profit of the sales.. At least the tariffs/rates should be revised as this resource belongs to the poor people who need substantial funds in social sector to uplift education/health etc.

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Please watch this program by Lucman. Lucman research exactly confirms the situation highlighted here. Please see the pathetic answers by the govt. official and his level of knowledge and understanding of the issue..

It’s a must see program to understand why we are in such a pathetic situation as a country…

  1. Fertilizer industry is being subsidized with dirt cheap gas with a propaganda that they provide cheap fertilizers to our growers. The fact is that our grower (specially small grower) is getting fertilizer at more or less import substitution price while fertilizer companies are making huge profits due to dirt cheap price of gas which is being charged to them. There are rumors of huge amounts of bribe being paid directly to our PM for this loot.

  2. Govt. is supplying a big portion of gas to large scale industry in Pakistan to run captive power plants who produce electricity at Rs. 4.5/unit. This gas should be diverted to IPPs and govt. should supply uninterrupted electricity to all the industry. Small scale industry get their electricity from PEPCO are subjected to long load shedding which has to be compensated by these industries by standby diesel generation increasing their cost to Rs. 18-20 per unit. Moreover as no new captive power plants are being sanctioned new industrialization big or small has completely come to halt as the only energy source available to the new prospective industry costs Rs. 18-20/unit considering the load shedding. At this price of electricity no new industry is viable. The priority of govt. should be to end load shedding instead of providing gas for captive generation..

  3. Our govt. is willing to pay $ 10/btu of gas to Iran. They are paying $ 18/btu for LNG import.. but they are not ready to pay $4/btu to the local companies for local gas. Fact is that there is enough gas but at the price govt. is willing to pay to local companies no new exploration or extraction is feasible. If gas is sourced from local sources and a fair price is paid.. it could mean a substantial income for the province of Sindh.. which can be spent on social sector in rural Sind.. but this looted Sind gas is being supplied to big industries in Sind/Punjab to run fertilizer plants and captive plants at throw away price. Govt. should immediately increase the price of gas for fertilizer industry and captive power plants.. and if they want to give subsidy to the farmer.. they should put in place a system to give direct subsidy to the farmers.. instead of giving this so called subsidy which is just enhancing profits of fertilizer companies. In fact they should lower the price of diesel (which is highly taxed) if they are serious in providing some relief to general public/farmer.. as diesel is the main component to run tractors/tube wells and logistic for the agriculture produces from farm to market.

  4. We need to correct the energy mix of the country. Hydel projects including KBD should be started immediately if we want to become a viable economy.

http://www.zemtv.com/2012/01/17/khari-baat-luqman-ke-saath-17th-jan-2012/

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Re: Loot sale of gas in Pakistan..

Alternative energy will be the end solution that whole world is thinking about . For Pakistan Coal will be a good resource that I suppose scientists are working on .

btw here is the link to ‘Khari Baat’ discussing the same issue.

PS: Watch this video and you’ll feel like jootiya maraying this government .

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the problem is that who will do it in the end? chaar saal say sun sun kay ab tou kaan bhi pak gayay hain...

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Planning commission’s report has suggested the same.. to stop the loot sale of gas to different sectors.

I hope GOP can act on this report and actually take decisions in national interest without getting influenced by different lobbies/mafias.

I doubt this report will actually be implemented considering the present lot in power who are always ready to put themselves on sale..

ISLAMABAD:
In a bid to end cross-subsidy, a proposal is under study to pay direct subsidy to special gas consumers including lifeline consumers and fertiliser plants and charge unified rates from other consumers.
“Cross-subsidies should be minimised by enforcing unified sale prices except for lifeline consumers and direct subsidies be paid to special consumers including fertiliser sector to ensure transparency in subsidy,” says a policy document submitted by the Planning Commission to the petroleum and other ministries concerned.
It also proposes charging full cost of supply from local and import sources.
The Planning Commission says a transparent mechanism should be introduced for gas pricing in order to encourage consumption efficiency and switch to least-cost alternative fuels as an economic consumer’s choice.
It observes that the gas sector suffers from cross-subsidies and low prices being charged from fertiliser plants.
“Consumer prices recover full supply costs but have remained low compared to alternative liquefied fuels owing to low wellhead gas prices that encourage inefficient use,” says the policy document.
It points out that average wellhead price of gas is $3.5 per million British thermal unit (mmbtu), accounting for 20 per cent of furnace oil price.
According to a comparison of the cost of gas for different consumers, the general industry pays the cost of natural gas at 25 per cent of furnace oil price, cement plants at 35 per cent of furnace oil price, fertiliser feedstock at 7 per cent of oil price, gas used as fuel in fertiliser manufacturing at 25 per cent of oil price and power companies at 25 per cent of oil price.
In addition to these, compressed natural gas (CNG) dealers pay the gas price equivalent to 55 per cent of petrol price while domestic consumers pay at the rate of 12 per cent of liquefied petroleum gas (LPG) price and commercial consumers at 30 per cent of LPG price.
The government has imposed a gas development cess this year to minimise the price differential among different consumers.
The commission is of the view that a long-term decline in gas production is a serious threat to energy security and if no action is taken, the current production of around 4,000 million cubic feet of gas per day (mmcfd) will decline sharply to around 2,500 mmcfd by 2020 and 400 mmcfd by 2030.
Current gas shortage exceeds 2,000 mmcfd and main reasons often cited for lack of exploration activities are security concerns and inaccessible areas. The commission points out that oil and gas production does not stop due to security concerns provided right policies and incentives are in place.
It proposes incentives and proactive policies and says upstream policy and regulatory framework requires immediate attention of the petroleum ministry to exploit the huge gas reserves.
Pakistan still has 29 trillion cubic feet of conventional gas reserves, 40 to 50 trillion cubic feet of tight gas and over 50 trillion cubic feet of shale gas in lower Indus basin. Around 150 trillion cubic feet of reserves are estimated to be in the whole Indus basin, excluding Balochistan and Khyber-Pakhtunkhwa.
Published in The Express Tribune, January 28th, 2012.

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Re: Loot sale of gas in Pakistan..

Planning commission’s report has suggested the same.. to stop the loot sale of gas to different sectors.

I hope GOP can act on this report and actually take decisions in national interest without getting influenced by different lobbies/mafias.

I doubt this report will actually be implemented considering the present lot in power who are always ready to put themselves on sale..

ISLAMABAD:
In a bid to end cross-subsidy, a proposal is under study to pay direct subsidy to special gas consumers including lifeline consumers and fertiliser plants and charge unified rates from other consumers.
“Cross-subsidies should be minimised by enforcing unified sale prices except for lifeline consumers and direct subsidies be paid to special consumers including fertiliser sector to ensure transparency in subsidy,” says a policy document submitted by the Planning Commission to the petroleum and other ministries concerned.
It also proposes charging full cost of supply from local and import sources.
The Planning Commission says a transparent mechanism should be introduced for gas pricing in order to encourage consumption efficiency and switch to least-cost alternative fuels as an economic consumer’s choice.
It observes that the gas sector suffers from cross-subsidies and low prices being charged from fertiliser plants.
“Consumer prices recover full supply costs but have remained low compared to alternative liquefied fuels owing to low wellhead gas prices that encourage inefficient use,” says the policy document.
It points out that average wellhead price of gas is $3.5 per million British thermal unit (mmbtu), accounting for 20 per cent of furnace oil price.
According to a comparison of the cost of gas for different consumers, the general industry pays the cost of natural gas at 25 per cent of furnace oil price, cement plants at 35 per cent of furnace oil price, fertiliser feedstock at 7 per cent of oil price, gas used as fuel in fertiliser manufacturing at 25 per cent of oil price and power companies at 25 per cent of oil price.
In addition to these, compressed natural gas (CNG) dealers pay the gas price equivalent to 55 per cent of petrol price while domestic consumers pay at the rate of 12 per cent of liquefied petroleum gas (LPG) price and commercial consumers at 30 per cent of LPG price.
The government has imposed a gas development cess this year to minimise the price differential among different consumers.
The commission is of the view that a long-term decline in gas production is a serious threat to energy security and if no action is taken, the current production of around 4,000 million cubic feet of gas per day (mmcfd) will decline sharply to around 2,500 mmcfd by 2020 and 400 mmcfd by 2030.
Current gas shortage exceeds 2,000 mmcfd and main reasons often cited for lack of exploration activities are security concerns and inaccessible areas. The commission points out that oil and gas production does not stop due to security concerns provided right policies and incentives are in place.
It proposes incentives and proactive policies and says upstream policy and regulatory framework requires immediate attention of the petroleum ministry to exploit the huge gas reserves.
Pakistan still has 29 trillion cubic feet of conventional gas reserves, 40 to 50 trillion cubic feet of tight gas and over 50 trillion cubic feet of shale gas in lower Indus basin. Around 150 trillion cubic feet of reserves are estimated to be in the whole Indus basin, excluding Balochistan and Khyber-Pakhtunkhwa.
Published in The Express Tribune, January 28th, 2012.

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At last a saner voice on the issue of gas. If gas priorities are set right as mentioned in the article the load shedding can end immediately. Alas the government has become a tool in the hands of the lobbies completely ignoring the national interest. One must realize the real issue is the load shedding and equitable distribution of electricity to all the sectors instead of pampering some privileged lobbies. Shame on people who have made gas an issue between provinces particularly Punjab and Sind. The following article demonstrates that IPPs in Sind are being run on less than half the capacity at the cost of inefficient captive power plants which are being run to generate electricity for some privileged industrialist at a cost of less than Rs. 5/unit while all the small scale/rest of the industry/consumer suffer due to load shedding in Karachi/Sind/rest of Pakistan.

Dr. Asim who is the state minister for power is a doctor whose sole qualification is that the used to provide facilities Mr. Zardari in Baqai hospital when the later was under confinement. The minister has made a huge mess in the energy sector by setting wrong priorities either intentionally to oblige the lobbies.. or lack of basic understanding of the sector. Some people think the minister whose tenure is now a few months remaining is running left and write to make some quick buck in LNG.. or some other lucrative deal.. or oblige the lobbies. He is responsible to halt totally the new industrialization not only in Punjab but also Sind and rest of Pakistan. Dr. Asim’s appointment in this key position is another glaring example of Mr. Zardari putting his cronies in key positions and destroying the country as a result.

The bottom line solution for the energy crisis in the short run is to run all the IPPs and distribute electricity from national grid to all at the same rate equitably as there is not capacity issue for the generation of electricity.. and completely ban the captive plants to run on gas for the time being. This will end load shedding all over the country and new industrialization will resume.

promises to end power outages in a day

KARACHI: The Karachi Electric Supply Company (KESC) promises to end power outages in the city on a day’s notice and slash its tariff if the government ensures supply of 400mmcfd of natural gas for its existing and new power generation plants as per commitment.

“We will not just be able to end load-shedding in Karachi and reduce electricity tariff, but also attract additional foreign investment in the country,” Tabish Gauhar, chief executive officer of the KESC, told The News in an interview.

Currently, the state-run Sui Southern Gas Company (SSGC) provides around 120mmcfd gas to the KESC for power generation, which is less than half of what the gas utility used to provide to KESC three years ago.

The SSGC says that it remains unable to meet KESC requirements as gas demand outpaces supplies.

But Gauhar said that the government needs to review its gas allocation policy in which KESC has been placed at the bottom in gas allocation quota.

“I agree that the domestic consumers should remain the top priority when it comes to the provision of gas,” Gauhar said.

“But KESC should be ranked as number two in the priority list as we provide gas to around 20 million people in Karachi and its nearby areas.

**It is ironic that KESC gets less gas than the captive power plants, which caters to only 600 or so industries of the privileged and consumes around 200mmcfd gas.”

“It is unfortunate that some of KESC’s most efficient gas-fired plants are lying idle, while gas-guzzling less efficient plants operated by industrialists are wasting a precious national resource.”**

When Dubai-based private equity firm Abraaj Capital took the management control of KESC in 2008 from Saudi Al-Jomaih,** the government agreed to provide 276mmcfd for its existing plants, while another 130mmcfd for its new 560 megawatt Bin Qasim II power plant. But KESC says that this commitment was never fulfilled.

Gauhar said that gas supply issue remains the most critical for the KESC, which needs a good energy-mix to keep the tariff down and reduce reliance on the four times costlier imported furnace oil.**

“Our furnace oil imports jumped to 50 billion rupees in financial year 2011 compared with 25 billion a year earlier.”

Producing electricity from furnace oil is not a viable option given the high global oil prices, which are likely to remain volatile and climb up further due to the turmoil in the Middle East, he added.

Gauhar said that power generation capacity was no longer an issue for the KESC.** “We have added 828 megawatts of new generational capacity so far. In 2012, this number will cross 1,000 megawatts. The capacity shortfall is no more an issue for the next few years at least and we are working to expand it more. We need only cheaper fuel to ensure uninterrupted supplies in the short-term. For this, we want natural gas as per the government commitment.”**

He said that Abraaj made investments on the back of certain government promises, which needs to be fulfilled.

To reduce the cost of power generation, KESC is looking for other options as well that includes power generation through the local and imported coal and LNG, Gauhar said. “But until that is done, we need an increased gas supply.”