Massive cut in natural gas flows from local fields worries E&P firms

ISLAMABAD: The reduction of natural gas flows from local fields by 350 million cubic feet per day (mmcfd) just to manage the gas pressure in the pipeline distribution system since the second week of March has agitated the country’s exploration and production (E&P) companies. These firms have told the government this action can result in sinking of oil and gas wells and the current gas reserves in the said wells due to loss of natural gas pressure. They say the recharging of the wells despite wasting time and money in terms of US dollars may not yield the required results.

“The authorities in Petroleum Division are also upset over the development and they have directed DGPC (Director General Petroleum Concessions) and DG Gas (Director General Gas) to hold a meeting today (Monday) with the top management of exploration and production (E&P) companies and gas companies to resolve the issue of natural gas curtailment,” senior officials of the Energy Ministry told The News.

As per the official document, the government representatives would hold the meeting with MD of OGDCL (Oil and Gas Development Company Limited), PPL (Pakistan Petroleum Limited), MPCL (Mari Petroleum Company Limited), POFL (Pakistan Oil Feld Limited), ENI, PGNiG (Polish Oil & Gas Company), PSO (Pakistan State Oil), PLL (Pakistan LNG Limited) and General Manager of MOL Pakistan, President United Energy Limited (UEP), Pakistan and managing directors of Sui Northern and Sui Southern.

Sui Southern and Sui Northern, officials said, are the entities responsible for managing the line pack pressure but so far they have failed to maintain it as per the SOPs (Standard Operating Procedures), putting the existence of some oil and gas fields wells operations in jeopardy. The reduction of 350 mmcfd natural gas flows from the major local gas field has irritated the management of E&P companies as this can inflict a huge damage to the wells. “The old gas fields are more vulnerable as they cannot be recharged when the gas flows from them are massively decreased.”

Pakistan is under long-term agreements for the import of 9 LNG cargoes from Qatar and one from ENI per month, meaning that 1 billion cubic feet per day is being taken in the system while the country has the local production of 3.2 bcfd. The RLNG is not being used by the stakeholders (power and industrial sector) because of less demand and high tariffs of gas. The Sui gas companies, PSO and PLL, are part of the long-term agreement for import of LNG with Qatar and ENI. The said companies cannot delay or deny the cargoes from Qatar and ENI because of high pressure in the line pack due to less consumption of imported gas. Also the said companies under the agreement cannot deny intake of any LNG cargo as it will put the agreements in doldrums.

The said companies also avoid denying the delay in berthing of LNG cargoes as it can cause huge demurrages to PSO, PLL and gas companies. So to ease the gas pressure in the system, the authorities are left to curtail the gas flows from the local gas fields, which also poses a threat to the very existence of oil and gas wells.

“This has virtually put the government’s top mandarins in the catch-22 situation. So, all the top officials of exploration and production companies, gas companies, PSO and PLL will assemble under one roof and put their heads together to find out a solution to the line pack issue problems as it has gone over 5 bcfd, which is dangerous to the gas pipeline distribution system.”

According to the Central Power Purchase Agency (CPPA), the use of RLNG power plants comes at the lower side of the Economic Merit Order as the electricity generated by RLNG as a fuel is costly and when the use of RLNG is increased in power plants, electricity tariff in the head of monthly fuel adjustment increases. “So CPPA avoids using RLNG in power plants at the maximum. Since the mercury has not gone up, the current power generation stands at 12,000MW.”

The CPPA officials said that first of all, it is mandatory to first operate the first-run plants such as hydel, wind, solar and nuclear power plants and then plants that consume natural gas, local coal, then comes imported coal and then RLNG as fuel for power generation as per the Economic Merit Order (EMO). “This is why RLNG is not being used at the maximum by the power sector,” the CPPA official said.

However, soon the temperature across the country will increase, so the demand of electricity will generate, then the use of RLNG will increase manifold, helping ease the gas pressure in the system. This is how the gas flow from local gas fields will also increase up to the optimum level.

The data of line pack pressure from March 2024 up till now shows that most of the time gas pressure in the pipeline distribution system remained over 5,000 mmcfd, the mark which poses a threat to the whole system as under SOPs, gas pressure should be limited up to 4,500 mmcfd.

To maintain even at just over 5,000 mmcfd line pack pressure, in addition to decreasing the local gas flows by 350 mmcft on daily basis, authorities are diverting an average 150 mmcft RLNG per day to the domestic sector, knowing the fact that there is no need for gas in this sector in the summer season. However, the diversion of RLNG to the domestic sector would cause an increase in gas tariff as gas companies would include the diversion of RLNG in their revenue requirement petitions.

The latest data about line pack pressure as of May 05, 2024 (Sunday) shows the line pack pressure stands at 5,103 million cubic feet (mmcft). The power sector is using RLNG of 535 mmcfd against its demand of 650 mmcfd for the month of May.

The gas consumption in the fertilizer sector stood at 62 mmcf. However, gas consumption by Engro Fertiliser was suspended on April 22, 2024, due to the startup of annual turnaround of its plant for about 54 days. However, the blend of imported and local gas of 280 mmcfd is being provided to the industrial sector (Export and Non-Export).