Petroleum Division distances itself from no-gas policy to CPPs

ISLAMABAD: The Petroleum Division of the Ministry of Energy on Tuesday distanced itself from the policy of gas disconnection to industrial Captive Power Plants (CPPs) and alleged that massive capacity payments, over Rs2.1 trillion for the current fiscal year alone in the power sector, had been contracted for the elite’s air conditioners and debt financing.
This was the crux of the Senate Standing Committee on Petroleum meeting presided over by Senator Umer Farooq. Petroleum Minister Dr Musadik Malik told the panel that the government had signed agreements to import liquefied natural gas (LNG) for the power sector, where LNG consumption was continuously declining.
He said that, on average, Pakistan imported one billion cubic feet of LNG per day (1BCFD), but the overall basket price of gas (both local and import) went up due to lower LNG utilisation in the power sector. The two gas utilities — SNGPL and SSGCL — get around 1.6BCFD of natural gas for their distribution network.
He told the committee that massive generation capacities had been contracted to meet air-conditioning requirements of a few people — around 6-8pc of the population — for peak summer months, but capacity payments had to be paid throughout the year for these air conditioners of the elites while power consumption drop in other 8-9 months.
“We will have to cut the demand of the elites. They would have to bear some burden”, he said without elaboration, adding that “capacity payment is the cost of bank loans”.
The minister said governments seldom indulge in gas and power purchase business, but in Pakistan, the government was the single buyer, and hence, it had to extend sovereign guarantees and other commitments for the private sector to invest.
Senator Mohsin Aziz suggested that the elite should be treated like the commoners. He criticised the government policy for the cessation of gas supply to captive power plants. He said the industries had invested in power plants with 50pc efficiency to meet their energy needs, but the current government was disconnecting gas for their power plants.
The Director General (Gas) of Petroleum told the committee that 1,180 captive power plants were operational across the country, consuming 358 million cubic meters per day (mmcmd) of gas.
These plants were established under the 2005 government policy, with 797 located in Sindh. He said the attempts to audit these plants were unsuccessful, and a proposal from the power division suggested transferring these plants to the national grid.
The DG told the panel that the Petroleum Division had not advocated for shutting down these plants. Instead, it was the Power Division that recommended to the IMF that these plants be closed. The Power Division argued that transitioning the industrial sector to grid power would eliminate capacity charges on the electricity grid. He said that no subsidies were provided for gas supply to captive power plants.
Senator Mohsin Aziz expressed concern that the caretaker government lacked the authority to make decisions on this matter, while Senator Abdul Qadir criticised the caretaker administration for increasing gas prices three times.
Published in Dawn, August 28th, 2024