Curtailing unaccounted for gas losses can end gas crisis

The current gas crisis can be brought under control without reducing supplies to any sector at all if the government curtails or minimises the gas losses in the country. The ‘unaccounted for’ gas (UFG) constitutes around 12 per cent of the total 4.3 billion cubic feet (BCFD) gas production of the country, according to some fertiliser producers. Every year around 516 MMCFD gas out of total 4.3 BCFD is stolen by different sectors and gas theft has increased substantially after the mushroom growth of CNG sector in the country, they say. The ‘system inefficiencies’ in SNGPL and SSGC distribution networks are the crux of the problem and have never been addressed properly. The government should carry out energy efficiency audit across the board to audit every single sector of economy using natural gas, including the domestic consumers who waste lot of gas using inefficient equipment. The government should focus on cost benefit analysis of using gas for different sectors of economy. Enhancing energy efficiencies of different sector is a medium to long term initiative which requires substantial investments and incentives at the policy level with clear and tangible benefits to those who comply and penalties on those who don’t, they say. Quoting a research report prepared by International Resources Group for the Asian Development Bank and the Federal Ministry of Planning and Development, they say the system-level economic valuation indicates that reducing gas to the fertiliser sector costs the economy Rs196 million per mmcfd, while increasing gas to the power sector costs the economy Rs98 million per mmcfd. The plant level comparison between fertiliser and power plants shows that using 100 mmcfd gas for fertiliser saves Rs29.4 billion compared to fertiliser imports, while replacing 100 mmcfd for power saves Rs6.4 billion compared to heavy fuel oil imports. Thus, using natural gas for fertiliser has a higher savings relative to using it for power generation by Rs23 billion. This compares well with the value from the economic model, which for use of 100 mmcfd gas in the fertiliser sector gives a net benefit of Rs19.6 billion. The team working on the report applied two approaches: an energy system economic analysis and a plant-level comparison. Both approaches gave a similar result: natural gas has a higher economic value for fertiliser production. The energy systems analysis shows that reducing gas to fertiliser and increasing gas to power both increase energy system costs. The plant-level analysis shows that importing fertiliser has a greater economic cost than that of importing heavy fuel oil for power generation. The fertiliser producers believe that using gas for producing urea is the most efficient and judicious usage as fertiliser sector is not just burning the gas to run the plants alone, it offers maximum value addition by converting the raw gas into precious urea grains and country hugely benefits from this import substitution. Gas should be provided as priority to the sector which creates maximum value addition. Fertiliser is the only sector which has zero per cent ratio of `unaccounted for’ gas, it never defaults on its payment obligations to gas utilities which are positive for cash flow of SNGPL or SSGC. Fertiliser sector is also one of the highest tax paying sectors of the economy in private sector of Pakistan. All other industries have alternative fuel options except fertiliser sector that uses gas as raw material to produce the key farm input, urea, for the farmers that ensure food security of the masses as well as provide raw material to important industries like textile and food processing.