Islamabad announces: The Oil and Gas Regulatory Authority is organizing a public gathering in Lahore today to discuss a proposal submitted by Sui Northern Gas Pipeline Limited (SNGPL). This proposal requests a significant 147% rise in gas prices for the fiscal year 2024-25.
Should the third proposed increase within a year be approved, it is expected to significantly raise inflation rates, potentially placing a heavy burden on the economically disadvantaged sectors of society.
The Sui Northern Gas Pipeline Limited (SNGPL) serves more than 7.22 million customers primarily in Punjab, Khyber Pakhtunkhwa, and Azad Jammu and Kashmir regions of North Central Pakistan. Currently, they are anticipating a significant revenue deficit of approximately Rs189.18 billion. A planned increase in gas prices is scheduled to commence on July 1, 2024.
The company intends to raise the typical gas price to Rs4,446.89 per mmbtu, representing a significant increase of Rs2,646.18 per mmbtu. This proposed price accounts for the previous year’s deficiencies in the natural gas sector. Additionally, SNGPL has declared an RLNG cost of service at Rs325.08 per mmbtu for the same duration.
After the Lahore meeting, Ogra plans to hold another session in Peshawar on March 27th. The regulator anticipates this gathering will offer a suitable platform for stakeholders, consumers, and the public to express their concerns. Ultimately, Ogra will make a decision based on the outcomes of the public hearing in Peshawar.
SSGC plea
Earlier this month, the Ogra held public hearings in Karachi and Quetta following a petition from the Sui Southern Gas Company (SSGC). In their request, the SSGC sought a gas price hike of Rs274.40/mmbtu due to an estimated revenue deficiency of Rs79.63 billion.
The company requested OGRA to establish the average price of one mmbtu gas at Rs1,740.80. Their petition includes forecasts for the anticipated gas price and RLNG service cost during the fiscal year, aiming to cover gas expenses, operational costs, and a fair return on assets.
Furthermore, the SSGC’s petition covers topics like projected gas supply volumes from local fields, actions taken to address the rising energy demand in the country, and investments in infrastructure to connect new areas. Meanwhile, the textile industry is taking steps to contest the significant gas tariff increase proposed by SNGPL.
Industrialists to oppose hike
During the Ogra hearing, the All Pakistan Textile Mills Association (Aptma) and Lahore Chambers have collectively decided to strongly oppose the SNGPL’s petition. In their opposition, the Aptma will challenge all the presumptions and forecasts in the petition concerning the diversion of RLNG to the domestic sector in 2024-25 and the projections related to the cost of gas, including RLNG and LPG Air Mix Subsidy at Rs702.411 billion.
Additionally, the textile industry has resolved to confront Sui Northern regarding the high unaccounted-for gas (UFG) in their network, which stands at 12%. This issue is 5-6 times greater than international benchmarks, leading to industry concerns.
The Sui Northern Gas Pipeline Limited (SNGPL) has filed a petition requesting a diversion cost of approximately Rs298 billion ($1 billion) for network expansion. This expansion aims to increase domestic consumption, leading to higher service costs and more diversion of Re-gasified Liquefied Natural Gas (RLNG). To accomplish this, SNGPL plans to invest tens of billions of rupees in pipeline infrastructure, with a working capital of Rs56.754 billion. The cross-subsidy for this project will be shouldered by the industrial sector.
The textile industry questions the logic behind the cost of Late Payment Surcharges (LPS) and the allocation of Rs125.3 billion for Working Capital. They also seek a clear explanation for the high operating expenses related to LPS payments to creditors and the financing cost for working capital, amounting to Rs125.322 billion, considering the frequent government revisions in gas sale prices.
At the hearing, they will additionally request an assessment of capital costs totaling Rs21.520 billion and revenue expenses totaling Rs1.949 billion for UFG control activities, considering a 7.25% UFG projection by the company. In the SNGPL network, domestic sector consumption has grown by over 4% – from 310 BCF in FY2022 to 323 BCF in FY2023 – accompanied by the highest UFG rates and cost of service.
