After gas supply resumption Two Urea plants to start production on 26th

ISLAMABAD: The federal cabinet has approved supplying re-gasified liquefied natural gas (RLNG) at concessional tariffs to two closed fertiliser plants from July 26 for next three months to meet the local urea demand.

Official of the Ministry of Industries and Production told The News that this arrangement is for three months, while their companies’ applications for privately import of LNG at spot rates independent of the Qatar LNG is under consideration. Since the LNG price has reduced to around $2/mmbtu due to weak demand and scarce storage, these urea manufacturers had requested the government to allow them import of LNG for their plants.

It is worth mentioning that the government in 2018 has allowed private sector’s LNG import. Anybody can import the gas after taking NOCs and licenses from various departments.

Official circles said the government planned to gradually move out of import business, while licence applications for LNG imports are under consideration. Under the new code, compressed natural gas, textile, fertiliser and other sectors can import LNG, re-gasify and inject it into the gas pipelines system for supply nationwide.

A private party intending to import LNG will have to take licence from the Oil and Gas Regulatory Authority and other relevant authorities.

The government is also planning to increase LNG consumption in power and fertiliser sectors to keep smooth operations of LNG supply chain, said the official.

The Ministry of Industries and Production has directed to the SNGPL for resuming gas supply to Agritech Ltd in (formerly Pak-American Fertilisers Limited) and FatimaFert, Sheikhupura that remained closed due to unavailability of feedstock since December 2019. Companies have been also informed for this decision and asked for making arrangements as by July 26, the SNGPL will resume gas supply to their plants.

Fatima Fertilizer has 45 mmcfd of gas demand with fertilizer production capacity of 2800 tons/day including 300 tons of urea a day. Agritech’s gas requirement is 28.5 mmcfd and can produce urea of 1200 to 1300 tons/day.

The ministry of Industries and Production has estimated that in coming months, urea demand will increase, as the government’s recently announced multi-billion agricultural package that subsidizes fertilizers, seeds and pesticides and tractors to farmers, will jack up demand for fertilizers. Under the package, subsidy of around Rs37 billion would be offered to farmers on purchase of fertilisers. This would include subsidy of Rs925 per bag of diammonium phosphate and other phosphatic fertilisers and Rs243 per bag on urea and other nitrogen fertilisers.

The RLNG would be supplied to these plants at Rs756/mmbtu. This would involve the government’s share at Rs959 million much less than the revenue spent previously on using these plants to produce the Urea fertilizer to cover up the shortage.

These plants will start its urea production operations from July 26. Urea inventory is expected to be below the buffer stock level of 200,000 metric tons in December and January and February next year, according to the National Fertilizer Development Centre.