The Economic Coordination Committee (ECC) is likely to direct an additional 91 million cubic feet of gas per day (mmcfd) to Engro Fertilizers and Genco-II power plant.
Officials familiar with the development said Mari Petroleum (MPCL) had informed the petroleum ministry that it had over 91mmcfd that could be allocated to Engro Fertilizers (60mmcfd) and Genco-II (31mmcfd). In turn, the petroleum ministry was seeking relevant approval from the ECC.
Moreover, the petroleum ministry will seek approval for any additional gas (beyond 91mmcfd) to be supplied to the fertiliser sector.
The precipitous uptake of gas comes on the back of Mari Petroleum’s ability to charge a premium price for 10% additional reserves.
The additional pay for higher gas exploration was government’s way of incentivising gas exploration companies into expanding and further exploring reserves. The Petroleum Policy 2012 has given the company the ability to benefit from the incentives that could help the company expand its operations.
Mari expected to bring on stream substantial new production (100 to 150mmcfd) by the end of 2016 due to the 2012 policy.
Power vs fertiliser
The tussle between power and fertiliser sectors to be the primary recipient of gas supplies has lasted over several years.
Under the Fertiliser Policy 2001, the government had dedicated shallow reserves of the Mari field to the fertiliser industry whereas deep deposits were earmarked for the power producers.
Originally a 60mmcfd reserve was allocated for the fertiliser sector. Of this, 34mmcfd was for Fauji, 13.5mmcfd for Fatima and 12.5mmcd for Engro.
However, in April 2010, the ECC redirected 60mmcfd away from the fertiliser plants, when it approved allocation of 183mmcfd of gas to power producers with the consent of then prime minister.
On the other hand, the petroleum ministry insisted that 60mmcfd from the Mari field belonged to the fertiliser sector and therefore it should be permanently supplied to the Engro plant in order to avoid disrupting urea production in the country.
Later on, in July 2013, this gas would be diverted to Engro Fertilizers since Genco plant was undergoing construction and would not be able to use the gas before the end of 2015.
The ECC, in a meeting held two months back, diverted 60mmcfd to the fertiliser sector – the original allottee – from the Genco-II power plant. However, as per the original arrangement, Engro Fertilizers has received only a fraction (12.5mmcfd) of the supply.