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Gas pricing exacerbates energy shortfall: Engro

Gas pricing for captive power plants (CPPs) should be brought at par with the industrial electricity tariff by removing indirect subsidies, Engro Corp’s Energy Research Group has recommended.

The pricing has had a direct impact on energy shortfall, as demand for gas rises. Currently, Pakistan’s total electricity shortfall is a massive 7,000 MW.

The study has been commissioned by Engro Corp President and CEO Ali Ansari. The report recommended that gas supply for captive power generation should be discouraged in the long-term and shifted to large-scale efficient power producers.

It also endorsed suggestions made by various experts to provide fuel to power plants in order of efficiencies and gradually eliminate subsidies by reducing the difference between Nepra notified and actual tariffs.

The Engro report discouraged the establishment of new gas-based CPPs – and said the increase of Rs600/mmbtu in fuel price for CPPs would generate Rs170 billion. This could be used to eliminate subsidy in 2,000 MW furnace oil-based generation.

It recommended an increase in fuel gas price to promote switching to coal as fuel gas price of more than $10/mmbtu would ensure adequate returns to coal power investors.

A minimum price of around $14/mmbtu is recommended to cover the impact of RLNG imports, which are inevitable.The research also strongly advocated eliminating the use of domestic gas as CNG in private vehicles, adding that CNG prices should be based on imported LNG and pegged to petrol.

“Imported LNG for CNG is viable only if LNG to petrol ratio is less than 86 percent,” he said.Ansari’s presentation depicted a grim picture of the country’s energy situation as the current power generation stands at 9,000 MW against 15,500 MW of demand (excluding KESC) – a 6,500 MW shortfall.

KESC supply is around 1,500 MW against a demand of 2,000 MW. National Transmission and Despatch Company estimates this to reach more than 12,000 MW by 2016-17.Severe shortfall in indigenous gas production is imminent as growth in production has been negative since 2006-07. For 2014, gas demand is expected to be 6.3 BCFD against a supply of four BCFD.

The Engro-Energy Research Group has recommended forming an integrated energy ministry consolidating various energy policymaking departments to develop the country’s energy plan.The report said that 40 percent onshore and 100 percent offshore potential was still unexplored, he recommended incentives for investments in oil and gas exploration – and safeguards for their protection.

It categorically underlined the importance of Thar coal development, adding that realising Thar coal phase one (6.5 MTPA) would bring energy security and provide cheap energy to Pakistan.

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