Fertilizer sector worst victim of gas curtailment in 2011

The ‘Year 2011′ was the worst period for domestic Fertilizer plants as they could hardly produce 4.9 million tons of urea against an installed capacity of 6.9 million tons due to announced and unannounced gas shortages throughout the year.

SNGPL based Fertilizer plants were especially badly hit as they could hardly managed to achieve 31 percent of Fertilizer production against their installed capacity, due to unavailability of gas.Currently, all four Fertilizer plants on SNGPL network are facing a complete shutdown, which has resulted in a huge production and financial loss to these Fertilizer plants.

Dawood Hercules Plant only produced 39 percent of urea which stood at 199,000 tons against a production capacity of 513,000 tons.

Pakarab Fertilizer Plant only produced 27 percent of urea which stood at 29,000 tons against a production capacity of 106,000 tons.Agritech plant only produced 34 percent of urea which stood at 146,000 tons against a production capacity of 428,000 tons and Engro’s new plant only produced 27 percent of urea which stood at 347,000 tons against a production capacity of 1.26 million tons.

Dawood Hercules Fertilizer CEO Rashid Lone said here on Monday that SNGPL based plants could only produce 31 percent of their installed production capacity which resulted in billions of rupees of loss to the Fertilizer industry which had invested over 2.3 billion dollars in enhancing its production capacity in last three years.He informed that all four Fertilizer Plants on the SNGPL network including Pakarab, Dawood Hercules, Engro’s new plant and Agritech remained the biggest victims of chaotic gas situation.

Instead of providing gas to local Fertilizer plants to produce urea domestically, the government preferred to import 1.45 tons of urea by spending a hefty amount of dollars 783 millions from precious foreign exchange.

In addition to this, the government also paid huge subsidy of rupees 54 billion on the imported urea to keep it at the price of locally produced urea.Agriculture contributes around 24 percent to the gross domestic product (GDP) of Pakistan and it also provides raw materials to all the major industries of Pakistan including, Textiles and Sugar.

For the economy of Pakistan to prosper, it is important for agricultural yields to go up which is only possible through the application of fertilisers in the right quantity at the right time.Decline in production poses a severe threat to the yield on the crops, resultantly; the country might miss its agriculture and export targets and also aggravate inflation in the country which is already higher than the regional peers, he feared.

He said the government had assured Fertilizer manufacturers that gas would be provided for 11 months to produce maximum Fertilizer for the agriculture economy, but the curtailment for year 2011 exceeded beyond all limits.

Manufacturing of urea Fertilizer requires natural gas as feedstock raw material.

The chemical composition of urea makes it impossible to use any raw material as an option.

Based on this fact, Fertilizer sector has been given priority for gas supply by the Government of Pakistan, once the requirement of domestic consumers is fulfilled.

This priority was clearly established in the ECC approved Gas Load Management Policy 2005, he added.All Fertilizer manufacturing concerns have signed a Gas Sale/Purchase Agreement (GSPA) for supply of natural gas to their respective plants for production of Fertilizer.

The GSPA is for a 12-month supply of an agreed quantity of gas.

On the contrary, gas supply to the Fertilizer sector gets cut off while General Industrial Consumers, with only nine-month GSPA, are being provided gas even in winters for four days a week.This is a blatant violation as the nine-month GSPA does not include winter gas supply.

Most of these General Industrial Consumers have their own Captive Power Plants which can be operational on dual fuel.

They are using natural gas (@ Rs 5.20 per KWH) as a cheaper fuel versus WAPDA (@ Rs 11 per KWH) or furnace oil, Lone concluded.

Incoming search terms:

• fertilizer industry
• engro fertilizer
• dawood hercules fertilizer
• engro rice plant
• fertilizers industry
• gas curtailment to fertilizer sector
• model of Fertilizer industries of punjab
• natural gas curtailment to pakarab fertilizers
• natural gas consumption in fertilizer pakistan
• importance of fertilizer by dh