The Pakistani government has decided not to provide gas to the cement sector in future and divert additional gas supplies away from Wapda, KESC and independent power producers (IPPs) after 2011, owing to gas shortfalls. This is part of the new fuel policy approved by Prime Minister Shaukat Aziz a few days ago. The policy will be formally announced soon to enable investors to make their plans accordingly, a senior official of the petroleum ministry told Dawn.

As a result, the government will now give top priority to develop power plants based on hydro, coal and nuclear resources to meet energy requirements of a growing economy. Moreover, if the gas import plans cannot be implemented and gas supplies remain limited to LNG imports in the next five years, the new thermal power plants will be based on furnace oil with the provision that these could be switched over to gas at a later stage. This will, however, put additional foreign exchange burden on the import of fuel.

The economic analysis of various competing fuels indicate that natural gas and LNG will cost $6 per mmbtu (million British thermal unit) against the current rate of about $3.5 per mmbtu, while fuel oil will cost $8.1 per mmbtu. The cost of Naptha and high-speed diesel has been estimated at $1.4 and $12.6 per mmbtu.

As such, domestic and commercial consumers will get top priority for gas supplies, followed by fertiliser and related industrial consumption.