The decision to transition the industrial sector from gas-based captive power plants (CPPs) to the national electricity grid, following directives from the IMF, could result in a revenue loss of Rs420 billion for Sui gas companies, according to a news report. Â
These CPPs, which provide energy to sustain industrial activities, generate approximately Rs420 billion annually for Sui gas companies. Of this, Rs100 billion is used as a cross-subsidy for protected gas consumers.Â
In total, there are 1,180 captive power plants in the country, with 797 operating in the Sui Southern system and 383 in Sui Northern’s jurisdiction. These plants are major gas consumers, using over 300 mmcfd of gas.Â
According to senior officials from the Ministry of Energy, if CPPs are disconnected from the gas supply, finding new gas consumers to match this level of usage will be challenging for the companies.
The officials also warned that without revenue from the CPPs, the Rs 100 billion subsidy for protected gas consumers may have to be covered by the federal budget.
In a bid to discourage CPPs from continuing to use gas, the government has already raised the gas tariff for these plants by Rs275 per mmbtu, bringing the rate to Rs3,000 per mmbtu. This rate will increase further to Rs3,700 per mmbtu in January 2025 to align with the ring-fenced price of RLNG.Â
Additionally, a proposal by the Petroleum Division seeks to place CPPs and the CNG sector at the bottom of the gas allocation merit order, further reducing their access to gas.
However, transitioning the industrial sector to the national grid will come with its own challenges. The Power Division has indicated that an additional 4,000 MW of electricity will be required to support the shift, necessitating the construction of 11KV and 132KW grid stations. While the 11KV stations could be completed in six months, the 132KW stations will take up to two years, with an estimated cost of Rs 20 billion.
