Urea price fluctuations in Pakistan

| Foreign Markets |

The Pakistani market has been divided following the increase of a tax whose proceeds are used to develop natural gas infrastructure. Some local urea manufacturers suffer, while the importers benefit from the change.

Prices must rise as well

Following long negotiations, the Pakistani government obtained the permission from the Supreme Court to raise Gas Infrastructure Development Cess (GIDC), an excise tax which is collected to finance the construction of the domestic part of the gas pipeline connecting Pakistan and Iran. Once the tax increase came into force, the local urea manufacturers were faced with a 10% increase of the manufacturing cost.

Was there any alternative?

The current situation is the most favorable for urea importers, who benefit from government subsidies, but resell at a market price. Therefore, the Pakistani fertilizer manufacturers have appealed to the government both to stop GIDC increases, and to decrease the budget subsidies for the imported urea. This would result in the intensification of domestic production of this fertilizer, thus boosting the revenue of the Pakistani treasury.

 

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New legislation concerning natural gas market

| Production & Resources |

On September 11th, 2013, the so-called “new three-pack”, or important amendments to Polish Energy Law Act and bills from July 26th came into force. New laws have a decisive impact on the development of competition on the gas market, giving the Chairman of Energy Regulatory Office the possibility to free up the prices of the resource for industrial clients. At the same time the amendments oblige Polskie Górnictwo Naftowe i Gazownictwo company to sell part of its resources on the Polish Power Exchange.

Easier access to cheaper resource

In 2014 Gaz-System may hold an auction concerning access to gas pipelines capable of importing c. 7 billion cubic meters of natural gas to Poland. The amount is equivalent to 45 percent of the domestic demand for the resource. The new rules of gaining access to gas pipelines by companies wishing to import gas to Poland have been specified in the Instruction of Transmission Network Traffic and Maintenance (IRiESP). The companies interested in access to gas pipelines will have to bid at an auction which will provide the full transmission capacity in Poland.

Natural gas from the West?

In 2014 importers are likely to gain access to Lasow interconnector on the Western border, as well as the virtual and actual pipeline transmission reversal in Yamal-Europe pipeline. The virtual reversal offers 5% of the transmission capacity and the actual reversal – c. 50 and 100%. In this way, Polish companies will be able to import 6.7 billion cubic meters of natural gas from Germany, where the fuel is cheaper than gas bought from Russia.

Articles prepares by Strategy and Development Team of Grupa Azoty “PUŁAWY”, headed by Andrzej Górecki.

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