SSGC to halt gas supply to power plants amid severe shortage

ISLAMABAD: Sui Southern Gas Company Ltd. (SSGC) said it will suspend supply to gas-based power plants for three months starting Dec. 5, citing a significant reduction in domestic gas availability and heightened demand, especially in Balochistan.

The utility informed power plants via letters that it is invoking a clause in the gas sale agreement that allows it to disconnect gas supply to the plants, according to a statement on its website. "The federal government's policy prioritises gas supplies to the domestic sector," it said.

SSGC is facing a severe deficit in gas supplies, which have declined by more than 39 percent in the past six years, from 1,200 million cubic feet of gas per day (MMCFD) in fiscal year 2018 to 730 MMCFD in fiscal year 2024.

The trend of diminishing gas supplies is evident when examining the data for the preceding fiscal years. In FY19, the gas supplies to SSGC were recorded at 1,164 MMCFD, followed by FY20 with 1,087 MMCFD, FY21 with 984 MMCFD, FY22 with 921 MMCFD, and FY23 with 847 MMCFD. The downward trajectory persists, with the latest figures for FY24 reflecting a further reduction to 730 MMCFD. This declining trend raises concerns about the sustainability and adequacy of domestic gas resources to meet the growing demands and requirements of various sectors.

Owing to the scarcity of indigenous gas in the system, the supply of gas under the 'contract for the supply of gas for power generation' is set to be temporarily halted. This suspension is scheduled to take place from December 5, 2023, to February 29, 2024, following clause-I of the contract for the supply of gas for power generation (GSA). The cessation of gas supply during this period has been mutually agreed upon by the involved parties.

The contract states, “Gas supply will be provided by the company on an ‘as and when available’ basis only during the period from March to November each year. The consumers will make dual fixing arrangements to avoid loss of production as and when gas is not available during March to November and also during December to February when the company will keep the consumers’ gas supply disconnected at his cost, each year.”

SSGC further conveyed that the terms and conditions outlined in the GSA between the parties explicitly affirm the company's right and authorization to suspend the supply from December to February annually. Consequently, in response to the acute shortage and unavailability of gas in the system to meet the demands of domestic consumers, SSGC is implementing the curtailment of gas supply effective from December 5, 2023. This action is being undertaken following the provisions stipulated in clause-I of the GSA.