SIFC moves to revive long-stalled Saudi-backed steel project with gas supply approval

The Special Investment Facilitation Council has moved to revive the long-delayed Saudi-backed Tuwairqi Steel Mills project after securing approval for gas supply, a key requirement that had stalled the investment for nearly two decades, The Express Tribune reported. 

The Economic Coordination Committee (ECC) recently approved gas allocation for National Steel Complex Limited, formerly known as Tuwairqi Steel Mills Limited, to support steel production operations.

The steel project was originally initiated during the government of Pervez Musharraf but remained inactive due to disputes over supply of gas at discounted rates.

According to officials, the ECC approved the gas allocation with the condition that supply would remain subject to availability and the economic merit order, while clarifying that the government would have no binding obligation regarding uninterrupted gas supply.

Under the approved arrangement, up to 40 million cubic feet per day of gas will be supplied for industrial processing requirements at the notified industrial tariff.

An additional 5 mmcfd may also be provided for captive power generation at the applicable tariff along with levies.

The ECC also directed the Petroleum Division to bring all future gas allocation cases involving bulk consumers exceeding 10 million cubic feet per day before the committee and review the Natural Gas Allocation and Management Policy 2005.

The approval followed repeated directives issued during the 11th, 12th and 13th meetings of the SIFC executive committee, which had pushed for gas supply to the steel complex, creation of a separate industrial category and signing of a long-term gas sale agreement with Sui Southern Gas Company.

The Petroleum Division had earlier proposed supply of 45 mmcfd gas at Rs1,900 per million British thermal units under a separate tariff category for large-scale manufacturing.

However, the Ministry of Finance and the Ministry of Planning opposed the proposal, delaying progress on the matter.

Officials said SSGC later offered supply of 40 mmcfd at the tariff notified by Oil and Gas Regulatory Authority, though the offer was initially not accepted by the steel complex.

The Ministry of Energy informed the ECC that the issue was also discussed at the Prime Minister’s Office, where Prime Minister Shehbaz Sharif directed authorities to ensure backward and forward integration of the project and assess local raw material availability.

Following the directives, the steel complex conducted feasibility studies and submitted undertakings to the Ministry of Industries, while the Petroleum Division’s Mineral Wing also provided input regarding raw material supply.

The SIFC later directed SSGC to issue a bankable commitment letter for supply of 45 mmcfd gas at the standard industrial tariff for an initial 10-year period, extendable by another 10 years.

Officials said the steel complex confirmed availability of system capacity for the required gas volumes and agreed to execute legally binding agreements with SSGC after completion of approvals under relevant laws and policies.

The ECC was also informed that the government had earlier revised natural gas allocation priorities, placing industrial processing units in the top category alongside domestic and commercial consumers, making the National Steel Complex eligible for gas supply under the updated policy.