20000412

Basic flaws in energy

sector may nullify new

gas finds benefits

RECORDER REPORT

KARACHI: Infrastructural deficiencies in energy sector, threaten to cancel the economic benefits of the new gas discoveries as over a billion cubic feet of gas reserves are available for immediate use but the existing transmission system is unable to carry this to the consumers.

We could alleviate the country's energy shortage by one billion cubic feet of gas but the deficient infrastructure does not allow us to make commercial use of this gas, Usman Aminuddin, the Federal Petroleum Minister told a press conference here on Tuesday.

He said about 600 million dollars investment was needed to upgrade the present gas transmission network to absorb the extra quantity available.

We are making concerted efforts to raise this additional investment and encourage the private sector to join us in this venture, Usman said. He has a three-year time-frame in mind for improving the gas transmission and distribution network once the funds are lined up.

This deficiency is also making the government cautious in the matter of entering into gas purchase agreements with the oil and gas exploration companies since it would become mandatory to lift gas after an agreement is signed.

Nevertheless, the minister said by the next year, about 450 million cubic feet of gas per day (mmcfd) could be supplied to the national transmission system from the new gas fields. Of this new supply of about 150 mmcfd will be allocated to the Bin Qasim Thermal Power Station of KESC on priority basis, he said. About eight independent power projects (IPPs) can also be converted to gas located mid-country, but the lack of infrastructure has been a prime hurdle in this regard.

Negotiations are under way with the rest of the gas companies including Lasmo, OMV and others to buy their gas, Usman said. "We have already modified our gas price policy to facilitate the gas producing companies. The ongoing discussions with the companies envisages capping of price, wellhead or transmission offtake," he said. However, he expected to strike deals with these companies shortly

Describing the policy, he said the government was now focusing on both exploration and upgradation of infrastructure simultaneously to rationalize the approach.

On the exploration side, Usman said that the government had been striving to free eight major oil and gas fields in the country, currently under force majeure. "We are trying to make these areas safe and protected so that activities could be restarted on these fields. The government plans to drill 28 exploratory wells in Balochsitan province, he said.

He reiterated the petroleum price review policy, saying the prices were reviewed on quarterly basis thus next review would be effective in June next. As far as fuel oil was concerned, he said, the price was adjusted on monthly basis. "We had corrected the fuel oil price on March 20 last and the next review would be made on April 20."

REFINERY SECTOR: Usman said that the government was according top priority to the Iran-Pak refinery project. Feasibility, economics and other projection were being updated since the original agreements had been signed in early 90s and a lot of things had changed by now. A Pakistani team recently visited Tehran to revive the project, he said. The technical design of the refinery included naphtha and hydrocraking which was our primary need to retrieve maximum diesel production.

He said that the supply of petroleum products would increase by next September when Parco refinery started commercial operation. The refinery was expected to run on trial basis by July or August, he said. It would help increase the indigenous supply of diesel, he said. Possibilities were being looked into at Parco to install hydrocraking plant with its present facilities, he said.

He, however, pointed out the logistic problems in the petroleum was these sector too. He said with the coming of Parco into operation pressure on northern region would increase.

Regarding Karachi to Multan white oil pipeline, Usman said the government had issued letter of support to the Parco. But so far the company had not arranged financial close. The construction of pipeline required 550-600 million dollars, he said.

Replying to a question Usman said that the margins of oil marketing companies were being negotiated.