Lack of Fuel and Power Forces 50% of Pakistan's Glass Producers to Close Shop

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Researched by Industrial Info Resources (Sugar Land, Texas)--Last week, the Pakistan Glass Manufacturer's Association (PGMA) (Islamabad, Pakistan) announced that 50% of its members had been forced to suspend operations, while the rest were contemplating shutting down, because of acute gas shortages and power cuts in the country. The worst hit regions are the North-West Frontier province and Punjab, where eight of the 16 units have stopped production. Production facilities with capacities of 100 to 150 tons per day were severely affected. Furnaces cooled down after frequent power shutdowns and a gas supply deficit, which not only increased power input and the costs of raw materials, but also resulted in damaged production equipment and low-quality products.

The PGMA stated that companies have been forced to lay off 20,000 people, and this number is expected to increase if the situation does not improve immediately. The association was also distressed that the revenue-generating sector in Pakistan was not getting the focus it deserved. Fuel shortages, load shedding, and high taxation are deterring growth, while India, the U.S., China and the European Union are working on developing this industry. The PGMA is also concerned that while the use of glass as an environmentally friendly alternative to synthetics and plastics is gaining popularity worldwide, the industry in Pakistan does not receive even basic infrastructure support.

Glass manufacturing is a continuous-process industry, where a sustained and steady supply of gas is critical. Unlike other manufacturing sectors, 80% of the glass production process is dependent on the supply of gas. Producers in Pakistan have been forced to move to furnace oil to run facilities, although most of their equipment works only on gas feed.

Although Sui Northern Gas Pipelines Limited (Lahore, Pakistan), one of the primary suppliers of gas in Punjab and the North-West Frontier province, produces 56.6 million standard cubic meters per day of gas, the firm has refused to concede 452,800 cubic meters per day of gas to glass manufacturers. The company has categorically stated that its first preference is to fulfill the needs of domestic customers. The PGMA is upset with the treatment meted out to the industry, which has managed to meet the country's demand with domestic production, reducing the amount of imports.

This comes at a time when the State Bank of Pakistan (Karachi, Pakistan) has already forecast negative growth for the manufacturing sector this fiscal year. While economic slowdown is certainly one of the reasons for this negative growth, acute fuel shortages in the country are dampening future industrial projects. Pakistan's current natural gas deficit is around 5.4 million standard cubic meters per day. By 2010, domestic production of natural gas is expected to be around 121.6 million standard cubic meters per day, but demand is set to rise to 135.8 million standard cubic meters per day. Pakistan is therefore looking at various options to strengthen its fuel supply.

Pakistan's prime minister, Yousuf Raza Gilani, who recently inaugurated the 165-megawatt Attock power plant, has said that load shedding will end by December of this year. Gilani indicated that while the country was facing a power supply deficit of 3,500 MW, the situation would be resolved through energy conservation methods and additional generation capacity.

Pakistan is also in talks with Iran regarding the construction of 1,724-mile, $7.4 billion Iran-Pakistan-India pipeline project, which on completion will carry natural gas to both India and Pakistan from Iran's South Pars field. The first phase of the pipeline will carry 60 million standard cubic meters per day of gas, which will be shared equally by the two countries.

The government has also initiated "fast track" projects as a solution to the energy crisis. Pakistan is expected to see between 4,000 and 5,000 MW of new power-generating capacity this fiscal year under these initiatives. Gilani also stated that letters of intent have been issued to promoters of 36 power plants, which would add 10,000 MW to Pakistan's installed power generation capacity. The government has also given letters of support to 14 projects with a combined power generation capacity of 2,759 MW. Of these, 12 power plant projects have attained financial closure. The government is also setting aside funds of approximately $9.3 billion to procure 30,000 tons of fuel for power plants.

Industrial Info Resources (IIR) is a marketing information service specializing in industrial process, energy and financial related markets with products and services ranging from industry news, analytics, forecasting, plant and project databases, as well as multimedia services.