Fertilizer plants to get local gas instead of expensive imported fuel

ISLAMABAD:The Economic Coordination Committee (ECC) of the Cabinet has approved a major policy decision to supply locally produced gas from the Mari Field to fertilizer plants, replacing expensive imported RLNG.

The move aims to reduce production costs, stabilize fertilizer prices, and ensure a steady supply of urea and DAP for the agriculture sector.

According to industry sources, the Petroleum Division’s proposal, approved by the ECC, focuses on diverting gas from Mari Energies Limited’s newly developed Ghazij and Shawal reservoirs in Ghotki, Sindh, to fertilizer producers. These reservoirs, which are currently producing 48 million cubic feet of gas per day, will serve as a long-term indigenous source for fertilizer production as output increases in the coming years.

The decision marks a structural shift in fertilizer policy. For years, the government had been supplying subsidized re-gasified liquefied natural gas (RLNG) to plants such as Fatimafert Limited and Agritech Limited to keep urea prices stable. Between fiscal years 2022 and 2024, these subsidies cost the national exchequer more than Rs 70 billion. With the ECC’s approval, this subsidy-driven model will now be replaced with local gas supplies, reducing financial pressure on the government while ensuring affordable fertilizer for farmers.

Under the new plan, fertilizer plants including Fauji Fertilizer Company’s Port Qasim unit, Fatimafert, and Agritech will receive indigenous gas directly from the Mari Field. Each company will build its own gas processing and compression facilities within the field to make the gas suitable for industrial use. The investment for this infrastructure, estimated at over 200 million dollars, will be borne by the fertilizer producers.

The ECC also decided to reallocate 110 million cubic feet of gas per day from GENCO-II, a state-owned power producer with largely outdated units, to Engro Fertilizer’s base plant in Mari. The Power Division confirmed that GENCO-II’s 747-megawatt Guddu plant can continue operations on Kandhkot field gas, freeing up Mari gas for more productive industrial use.

Initially, Fatimafert and Agritech will share the 48 mmcfd currently produced from Ghazij and Shawal reservoirs until full production capacity is achieved within two years. The shortfall will be met through backfill from Mari’s older HRL reservoir. No subsidized RLNG will be supplied to fertilizer plants after October 30, 2025, except in limited cases to maintain network stability.

The Petroleum Division emphasized that the shift to local gas will save foreign exchange, promote energy self-sufficiency, and help prevent further build-up of circular debt in the gas sector. The plan also ensures that the fertilizer sector will continue to pay prices at or above the wellhead cost determined by the Oil and Gas Regulatory Authority (OGRA), preventing negative gas development surcharges.

The proposal was reviewed by a high-level committee headed by the Deputy Prime Minister Senator Ishaq Dar, who oversees fertilizer price stability, and received unanimous support from the Ministries of Industries, National Food Security, Power, Climate Change, Planning, and Privatization. Following this endorsement, the ECC gave its formal approval.

Industry sources said the decision is a major step toward energy reform and agricultural stability. By switching fertilizer plants to local gas, the government expects to ensure continuous production, shield farmers from sudden price spikes, and reduce the burden of imported fuel on Pakistan’s fragile external account.