Utilities deal E&P firms Rs50bn loss over 4 years by cutting gas outflows

• SNGPL started reducing gas outflows from November 13.
• Country's main gas pipeline now being used for storage.
• Data shows line pack pressure still not being lowered.
  

ISLAMABAD: Amid the prevailing fiscal challenges faced by the country's energy sector, it has been revealed that exploration and production (E&P) companies have suffered over Rs50 billion loss in four years (2021-24) due to a reduction in their gas outflows by gas utilities, The News reported on Monday.

A senior official of the Energy Ministry has told the publication that the cut in gas flows was aimed at lowering the line pack pressure in the national gas transmission system.

Companies including the Oil and Gas Development Company Limited (OGDCL), Mari Petroleum, Pakistan Petroleum Limited (PPL) and MOL have time again warned the authorities that the practice of decreasing local gas outflows to safeguard the gas transmission system was perilous.

The E&P companies, according to officials, argued that sometimes those wells nearing depletion, if compelled to reduce natural gas flows, would cause irreparable damage and the wells cannot be recharged to their original flow levels.

"They require capital-intensive investment through artificial lift methods to resume production," noted the officials.

In the past many wells braved huge damages because of a reduction in their gas outflows and they could not be recharged this is how many E&P companies braved mammoth losses, which according to the stats is over Rs50 billion in the period 2021-24.

The Sui Northern started reducing the gas outflows from local gas fields by 200mmcfd from November 13, 2024, which have now further been reduced by 285mmcf, making the gas fields vulnerable.

There are chances that many wells may not be recovered with the same volume of gas with the required pressure.

As of yesterday, the latest data available with The News regarding the reduction of gas outflows shows the system has reduced the intake of gas by 90 mmcfd from Sui gas field of Pakistan Petroleum Limited (PPL), 22mmcfd from Qadirpur gas field of OGDCL, 48mmcfd from HRL/ Ghazij gas field of Mari Petroleum Company Limited, 15mmcfd from Tough field of OGDCL, 50mmcfd from MOL field of MOL, 45mmcfd from Nashpa, 4mmcfd from Tolang field of MOL and 11mmcfd from Dhok Hussain field of OGDCL.

The main gas pipeline in the country is now working as storage of the gas instead of being used for transportation and distribution services just because gas consumption has reduced manifold in the country, particularly by the power sector.

The Sui Northern Gas Pipelines Limited (SNGPL) says the power sector is continuously consuming less re-gasified liquefied natural gas (RLNG) against the allocation. This situation has led to high system pack/pressures across the entire transmission network. Mitigation steps are being taken accordingly.

It further said the Power Division has reduced the gas outflows from the local gas fields by 285mmcf per day until now, starting by 200mmcf from November 13, 2024. However, the data shows that the line pack pressure is not being reduced as the power sector has further reduced the intake of imported gas for power generation to just 174mmcf.

The SNGPL says the power sector is continuously consuming less RLNG against the allocation. This situation has led to high system pack/pressures across the entire transmission network. Mitigation steps are being taken accordingly.

The supplier further said the Power Division has reduced the gas outflows from the local gas fields by 285mmcf per day until now, starting by 200mmcf from November 13, 2024. However, the data shows that the line pack pressure is not being reduced as the power sector has further reduced the intake of imported gas for power generation to just 174mmcf.

The government has already managed to shift 5 LNG cargoes to 2026, earlier destined to reach Pakistan in 2025. Pakistan imports 10 Liquefied Natural Gas (LNG) cargoes (9 from Qatar and one from ENI) every month but the consumption by the power sector has never been as per the demand the Power Division submits for every month. In the pipeline, apart from the imported gas, the country’s local gas is also included.

In the wake of high gas tariffs, imported and local gas consumption has reasonably reduced.

The Power Division says if it utilises the RLNG power plants at the maximum, the basket price of electricity would increase as the RLNG's cost for power generation is higher, which is at Rs26 per unit.

So the power sector prefers to first run the cheaper power plants which consume local gas and coal as fuel. The system also prefers to run nuclear and hydropower plants as their tariffs are on the lower side. Now in November 2024, the electricity demand has decreased as the use of ACs is on the decline, particularly in the upper Punjab and KP and northern parts of the country.

The line pack on Sunday (November 24, 2024) was at 5.159bcf which was at 5.174bcf on Saturday. The power sector is consuming 174mmcf of gas for power generation, while the fertilser sector is 92mmcf.

The indigenous gas input in this system stayed at just 481mmcf whereas the RLNG input was at 699mmcf out of which 64mmcf has been retained by Sui Southern. The export and non-export industry is using 225mmcf in the system of Sui Southern.