Amid a significant decrease in RLNG consumption nationwide, the shift of the industrial sector from gas-based captive power plants (CPPs) to the national grid, following IMF directives, is projected to result in a recovery loss of Rs420 billion for Sui gas companies.
Senior officials from the Energy Ministry explained to The News that CPPs currently generate Rs420 billion annually, which supports a Rs100 billion cross-subsidy for protected gas consumers. The total number of CPPs is 1,180, with 797 in the Sui Southern system and 383 in the Sui Northern system. These plants are major gas consumers, and their removal from the system would require finding new consumers to replace the 300 mmcfd of gas they use. With decreased gas consumption and excess line pack pressures threatening the national gas transmission system, selling gas to new consumers is becoming increasingly difficult.
Moreover, discontinuing gas supply to CPPs will make it impossible to maintain the Rs100 billion subsidy for protected gas consumers, forcing the government to cover this cost from the federal budget.
To deter gas use by CPPs, the government has already raised their gas tariff from Rs2,750 to Rs3,000 per MMBTU. This tariff will increase further to Rs3,700 per MMBTU starting January 2025, aligning with the ring-fenced price of RLNG.
Additionally, a summary from the Petroleum Division is currently with the Economic Coordination Committee (ECC) for approval of a revised gas allocation merit order, which places CPPs and the CNG sector at the end of the list.
The Power Division has indicated that if CPPs are banned from receiving gas and the industrial sector is switched to the national grid, an additional 4,000 MW of electricity will be needed. To meet this demand, the Power Division will need to invest Rs20 billion in constructing 11KV and 132KV grid stations. While the 11KV grid stations can be completed within six months, the 132KV stations will require 1.5 to 2 years to build.
