Govt raises gas prices for fertiliser plants to unify rates

ISLAMABAD: The government has increased the gas sale prices for three fertilizer plants that use gas from Mari Petroleum Company Limited (MPCL) as part of a plan to unify feed gas prices for the fertilizer industry with industrial rates.

The Oil and Gas Regulatory Authority (OGRA) notified Engro Fertilizer Company Limited, Fauji Fertilizer Company Limited (Rahim Yar Khan), and Fatima Fertilizer Company Limited of the new rates, which are effective from October 1, 2023.

The plants will pay Rs580/MMBtu for feedstock and Rs1,580/MMBtu for fuel stock. The move comes amid concerns that the fertilizer industry is accused of not passing on subsidies to farmers. After the decision, these companies might further increase urea prices despite having substantially increased prices.

A senior official of the petroleum division said that although the unification will save over Rs85 billion, the allocation of these funds to small farmers remains unclear. With this revision in the gas sale price for fertilizer, the estimated annual net positive differential margin from the fertilizer sector would be over Rs16 billion for FY 2023-24.

It is to be noted that last December, Mari Petroleum Company Limited nked a deal with three major fertilizer firms—Fauji Fertilizer Company, Fatima Fertilizer Company Limited, and Engro Fertilizers Limited—to sustain MPCL’s Habib Rahi Limestone gas production.

Mari said, “Mari Petroleum Company Limited has executed a Framework Agreement for the installation of Pressure Enhancement Facilities at Mari Gas Field, Daharki, Sindh with FFC, ENGRO, and FATIMA.”

The project entails constructing pipeline infrastructure, optimizing the surface pipeline network, and installing compressors within the Mari Field.

Under the OGRA Ordinance, gas sale prices for fertilizer plants on SSGCL and SNGPL systems are revised from time to time; however, prices for MPCL’s plants have not been revised since OGRA’s October 23, 2020.

It is to be noted that there are 10 fertilizer plants in Pakistan, and six of them receive dedicated supplies from Mari’s network. Gas Supply Agreements for six Mari-based plants are valid until June 2024.