The fertilizer companies are currently facing gas shortage of around 200mmcfd against an average daily demand of 800 million cubic feet of gas.
According to a data, the fertilizer sector consumes 15% of country’s whole natural gas while the existing gas shortage of 25 % or 200mmcfd may not end in near future, however, it will be reduced to 15 percent in next two years after additional gas of 400-450mmcfd addition to the system.
However, in short-term the situation would remain crucial with 35 pct gas shortage in Sui network (unless government allocates additional gas from other sectors) while plants on Mari network would face 15 percent gas shortage.
Experts said that in this scenario the local manufacturers including fertilizer plants of Engro and Fatima, will continue to raise urea prices to avoid production losses.
Figures reveal that Pakistan’s gas distribution network is segmented into three companies namely SNGPL, SSGC and Mari Gas with market share of 46 percent, 29 percent and 15 percent, respectively.
In addition, there are few E&P companies which directly supply gas to power sector with a market share of 10 percent. Over the last 3-years (FY09-FY11), total gas supply from Sui-network (SNGPL & SSGC) remained stagnant around 2,600mmcfd while gas supplies from Mari have increased by an average 3 percent to 504mmcfd.
Interestingly, Mari is the biggest supplier of gas to fertilizers with a lion share of 70 percent followed by SNGPL (19 percent) and SSGC (11 percent). During ongoing FY11, average gas supply from Sui network to fertilizer stood at an average 177mmcfd (down 11 percent). This is estimated to be 35 percent lower than actual demand of more than 300mmcfd in Sui network. This is inclusive of additional demand from Engro’s new 1.3m tons urea plant having long term contract with SNGPL. In case govt restores full gas to Engro’s new plant (at the expense of other sectors), gas shortage may reduce to 20 %.