Govt increases gas tariff for 3 fertiliser plants to unify rates

• Plants to pay Rs580/MMBtu for feedstock, Rs1,580 for fuel stock.
• Petroleum division official says unification will save over Rs85bn. 
• Mari Petroleum Company also inked deal with three plants last year. 

ISLAMABAD: In a bid to unify feed gas prices for fertiliser industry with industrial rates, the government has increased the gas sale prices for three fertiliser plants that use gas from Mari Petroleum Company Limited (MPCL), The News reported Tuesday. 

The Oil and Gas Regulatory Authority (Ogra) notified the three plants — Engro Fertiliser, Fauji Fertiliser (Rahim Yar Khan), and Fatima Fertiliser — 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 fertiliser 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 fertiliser, the estimated annual net positive differential margin from the fertiliser sector would be over Rs16 billion for FY 2023-24.

It is to be noted that last December, Mari Petroleum Company inked a deal with three major fertiliser firms 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, optimising the surface pipeline network, and installing compressors within the Mari Field.

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

It is to be noted that there are 10 fertiliser 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.