ISLAMABAD:

The Special Investment Facilitation Council (SIFC) has stepped in to revive almost two-decade-old Tuwairqi Steel Mills project, owned by a Saudi group, by approving the supply of gas – a critical input for steel production.

An agreement for setting up the mill had been signed during the tenure of Pervez Musharraf’s government but later the project ran into a dispute over the provision of gas at a discounted rate.

In the absence of gas supply, the mill could not be established. Now, the current government has decided to revive the project by approving the release of gas to National Steel Complex Ltd, formerly Tuwairqi Steel Mills Limited.

The Economic Coordination Committee (ECC), in a recent meeting, green-lighted the allocation of gas to the steel mill with the stipulation that apart from the condition of gas availability, the economic merit order would also be followed. It agreed that there would be no binding obligation on the government regarding availability and supply of gas.

In future, the economic decision-making body decided, the Petroleum Division would bring all cases of gas allocation to any bulk consumer, exceeding 10 million cubic feet per day (mmcfd), to the ECC in line with its stance in the current case. It gave directives that the division would review and update the Natural Gas Allocation and Management Policy 2005.

It was proposed to ensure the availability of 50 mmcfd of gas for the National Steel Complex as well as creation of a separate consumer category for determining gas tariffs.

During the 12th and 13th meetings of the SIFC executive committee, the directives, already issued in the 11th meeting, were repeated that sought gas supply at a lower tariff, the creation of a separate category and the signing of a gas sale agreement with Sui Southern Gas Company (SSGC).

The Petroleum Division was advised to immediately process a summary in line with decisions of the executive committee for seeking the ECC’s nod. It was also recommended that the gas sale deal between SSGC and the steel complex be signed for a period of 10 years.

In line with the directives, the Petroleum Division in February 2025 circulated a summary for the ECC’s consideration, proposing supply of 45 mmcfd at Rs1,900 per million British thermal units (mmBtu) with the creation of a separate category for large-scale manufacturing.

However, the Ministry of Finance and the Ministry of Planning, in their comments, did not support the proposals and the matter again came to a standstill. SSGC said that the supply of 40 mmcfd was offered to the National Steel Complex at the Ogra-notified tariff, but they declined to accept the offer.

The Ministry of Energy (Petroleum Division) apprised the ECC that a presentation was also arranged at the Prime Minister’s Office. On the occasion, the PM said that backward and forward integration of the project should be ensured and the availability of local raw material be evaluated. Accordingly, the steel complex conducted a study and also provided undertakings to the Ministry of Industries. The Ministry of Petroleum (Mineral Wing) gave its input about the supply of raw material. The SIFC directed SSGC to issue a credible/bankable letter for supply of 45 mmcfd at the standard industrial tariff (initially for 10 years and extendable by another 10 years) not later than November 26, 2025.

The steel complex confirmed the availability of system capacity for the requisite 45 mmcfd at the applicable Ogra tariff from time to time. It was agreed that SSGC and the steel complex would execute the relevant legally binding instruments for gas supply subject to the receipt of approvals under the applicable policies and laws.

It was highlighted that the ECC had earlier approved a revision in the natural gas allocation priority whereby the industry (processing) was placed in the first category alongside domestic and commercial sectors.

In line with the approved priority order, the National Steel Complex qualified for gas supply because of being a large industrial undertaking. Accordingly, the Petroleum Division submitted proposals for consideration of the ECC.

It was requested to approve supply of up to 40 mmcfd for meeting the steel complex’s processing requirements at the notified industrial tariff. SSGC may also provide up to 5 mmcfd for meeting the captive power generation requirement at the notified tariff along with the applicable levy. Based on the gas allocation volumes, SSGC and the steel complex would negotiate terms and conditions for formal execution of the gas supply agreement.