The Liquefied Petroleum Gas (LPG) constitutes 1% of Pakistan’s energy mix. This consumption trend is primarily due to a much higher supply of indigenous natural gas at an affordable rate. In the recent years, however, due to a widening demand-supply gap of natural gas, especially in the urban areas as well as due to higher kerosene prices, there has been an increase in LPG use.
Extraction of LPG/NGL (Natural Gas Liquid) by JJVL started way back in 2005 mainly due to the presence of rich gas of Badin Gas Field owned by UEP which was producing 150+ MMCFD volume. Since it was not a pipeline quality gas and SSGC had the extraction rights of Badin gas, for extracting heavy hydrocarbon from the gas, Sui Southern Gas Co. Ltd. (SSGC) started processing it through a Royalty Arrangement under an Implementation Agreement (IA) with JJVL which was declared null and void by the Supreme Court in 2013.
Later, SSGC and JJVL underwent another arrangement under MoUs for various gas fields which continued till June 2018 when the SC took suo moto action and declared termination of MoUs as valid. Subsequently, SSGC stopped the supply of gas to JJVL and JJVL Plant remained closed for six months. Subsequently, JJVL submitted a proposal based on profit sharing before SCP. The court appointed a third party, AF Ferguson& Co. Chartered Accountants (AFFCO), as its deemed receivers. After consulting both SSGC and JJVL, AFFCO devised a provisional mechanism of revenue sharing to be finalized at a later stage. Consequently, an agreement was signed between the two parties and submitted before SC for its approval and validation. The period of the agreement was for 18 months which expired automatically when the term ended on June 20, 2020.
The decision to discontinue the agreement by SSGC was based on certain technical and commercial aspects. The SSGC recently engaged the services of an international consultant in order to conduct studies on the way forward. The consultant advised SSGC that current gas stream at Indus Left Bank Pipeline (ILBP) system was a lean, pipeline quality gas, which meant that it would not create any adverse effects on pipeline and its allied installations, if injected directly into the system. In other words, there would be no problem in adding the gas directly into Transmission pipeline network without any extraction of LPG/ NGL.
The current shrinkage value at JJVL is around 8~10 MMSCFD. Since this volume will be available in SSGC’s Transmission system, therefore, the gas utility can effectively deploy these volumes in its Transmission network. Multiple better commercial avenues would be available for consumption of this shrinkage volumes.
The issue of the extraction deal between JJVL and SSGC has come under discussion in the country’s legislative bodies. In a briefing held in Islamabad recently, the Senate Standing Committee on Petroleum has recommended to SSGC to revisit its decision in the best national interest.
