Gov aggressive to replace CNG with LPG in transports
June 08, 2012
In order to conserve energy resources and ensure the availability of natural gas to industries and power sector, the government is working hard to substitute Compressed Natural Gas (CNG) with Liquefied Petroleum Gas (LPG) in the transport sector which hit all relevant sectors of automobile industry and their billion of rupees investment.
The plan to shift energy resources from CNG to LPG is sudden, abrupt and unsettle that confused all the stakeholders who have become at the mercy of the government to save their business under already tight situation.
Pakistan is the country where the most number of vehicles nearly 3.5 million are based on CNG in the world. Besides the number of CNG station have grown up to 3,331 across the country in last five to six years with the estimated investment of Rs 436 billion, according to industry people.
There are number of importers and CNG-kit manufacturers established assembling units are now waiting to see their investments sinking after they shut their plants following government ban on CNG kits importers and its parts in March 2012.
Moreover the government has decided to impose development cess of Rs 159 per mmbut which will be additional of already set Rs 151 per mmbtu that will translate to CNG prices above Rs 95.
The continuous increase in CNG prices and reduction in LPG rates is also a part of this plan as a matter of fact the LPG prices came down to Rs 90 per kg at retail level.
Pakistan is left with only 50 percent natural gas reserves as high consumption in different sectors has exhausted more than 50 percent of the overall reserves of 54 trillion cubic feet (tcf) by financial year of 2011-12, a report of State Bank of Pakistan said.
The country now has sufficient reserves to last just over 20 years, under the increasingly unlikely scenario that current production rates are maintained throughout.
The consumption of increasing natural gas is rapidly. As on December 31st 2011, the balance recoverable natural gas reserves have been estimated at 24.001 Trillion Cubic Feet.
The average production of natural gas during July- March 2011-12 was 4236.06 million cubic feet per day (Mmcfd) as against 4050.64 (Mmcfd) during the corresponding period of last year, showing an increase of 4.57 percent.
The marginal growth in gas production coupled with increase utility of natural gas in different sector turned a load-shedding scenario across the country, which saw closure of many industrial units and unemployment in industries in the regime of present government.
The shortfall peaked during the winter season, when gas consumption for domestic heating increased, and demand reached 4,580 million cubic feet per day (mmcfd) versus supply of 3,878 mmcfd. Throughout the remainder of the year, shortfall in the system varied between 10 to 15 percent of demand (400-700 mmcfd), depending on supply availability from key fields.
The country experienced some of the worst gas shortages in its history in 2011 as supply to the industrial and power sectors was significantly curtailed, resulting in closure of hundreds of units and losses to business and productions.
However it is fact that 7.7 percent of the total CNG produced by the country is consumed by transport sector, which is lowest share among all sectors including domestic consumption, power, fertilizer, textile, and cement sectors.
President All Pakistan CNG Owner Association said the government policy is total disaster for CNG industry which is providing direct and indirect employment of 50 million people.
He said the billion of rupees invested by CNG owners and commuters have yet to be recovered and now they are being asked to set up condensers and dispenser of LPG, which is not available in the local market.
The LPG is being imported and its prices is related to petroleum prices which vary on the higher level hence industry people are reluctant to follow the government directives towards supplying LPG at retail outlets.
On the other hand, there is no formula has been set for LPG prices at retail level neither rules and regulations have been specified for LPG sale.
Oil and Gas Regulatory (Ogra) allowed 17 companies to manufacture LPG cylinders without even formulating required safety and quality standards. Moreover, it also gave green signal to investors for setting up over 100 LPG stations across the country without taking on board the stakeholders of the industry.
Almost all the stakeholders of the energy sector have opposed the move to convert vehicles from CNG to LPG but the government is still insisting to initiate the plan at any cost.
The car makers and general public in Pakistan are being forced to convert their vehicles too much costly imported LPG that will in fact cost millions of people to buy new LPG kits and cylinders in coming years.
But a next couple of years, the CNG users have no option except to convert their vehicles from CNG to LPG due to artificial shortage and continuously increasing CNG prices.
On the other hand, there will be a window of opportunity for quick money makers to sell out thousands of new LPG kits and cylinders to existing CNG users and minting money from the government policies.
The government needs to arrange natural gas resources through its projects like Iran Pakistan gas and LNG in order to bridge the demand gap with proper supply. It must give protection to local and foreign investors in formulating policies without taking care of its vested interest and corruption.