ISLAMABAD: Pakistan is preparing another major restructuring of its gas sector as the government considers breaking up the country’s two major gas utilities. The proposed plan would transform Sui Northern Gas Pipelines Limited (SNGPL) and Sui Southern Gas Company Limited (SSGCL) into five separate companies.
The structure would include one national transmission company and four provincial distribution firms. The government is considering the model as part of wider reforms aimed at improving efficiency, encouraging private investment and addressing financial challenges across the gas supply chain.
Government Reviews Gas Sector Restructuring
Petroleum Minister Ali Pervaiz Malik discussed the proposed reforms during a meeting with World Bank Country Director for Pakistan Bolormaa Amgaabazar. Officials reviewed plans to restructure the existing Sui companies by separating their transmission, distribution and energy businesses.
“The reform framework also proposes the restructuring and unbundling of the Sui companies by separating their transmission, distribution and energy businesses, while creating greater opportunities for private sector participation throughout the gas value chain,” an official statement said after the meeting.
The government wants to move quickly on the restructuring process. Officials are now expected to prepare a roadmap for Prime Minister Shehbaz Sharif’s approval by the end of August 2026.
New Gas Transmission Company Proposed
Under the proposed structure, a National Gas Transmission Company (NGTC) would take over the transmission networks currently operated by SNGPL and SSGCL.
The new entity would function as a common carrier for existing and future gas distribution companies. Its proposed structure would resemble the National Transmission and Dispatch Company model used in the electricity sector.
NGTC would also provide third-party access to its transmission network. However, it would not buy or sell gas itself.
Instead, the company would transport locally produced gas and LNG. It would charge wheeling fees to suppliers and purchasers using its network.
Some major business groups are reportedly interested in participating in the transmission business. However, concerns remain about how the proposed structure would affect existing stakeholders.
Four Provincial Distribution Companies Planned
The government also plans to divide the distribution networks of SNGPL and SSGCL into smaller companies. These entities would operate under common principles within their respective provincial jurisdictions.
Officials would consider several factors when determining the size and structure of the new companies. These could include population, network density, gas demand, workload and operational efficiency.
The distribution companies would also need to remain financially sustainable. However, regional differences in system losses could make the restructuring particularly challenging.
Balochistan currently has the highest system losses, followed by Khyber Pakhtunkhwa, Sindh and Punjab. The differences could complicate the existing system of cross-subsidies and uniform national gas prices.
Previous Unbundling Plan Faced Opposition
The government has considered restructuring the two Sui companies before. However, the previous proposal did not move forward.
Independent consultant KPMG and the Oil and Gas Regulatory Authority had raised concerns about the financial and technical viability of the earlier unbundling model. They also called for broader consultations with provinces and private shareholders.
The proposal was eventually shelved in 2020. Now, the Petroleum Division wants to revive the plan and accelerate the process.
World Bank May Help Fund Transaction Adviser
The Petroleum Division plans to appoint a transaction adviser to develop the details of the proposed restructuring. The adviser would examine how SNGPL and SSGCL could be divided into five companies.
The World Bank could finance the adviser’s cost. Alternatively, SNGPL and SSGCL may share the expense equally, with the cost eventually recovered through consumer tariffs.
However, both existing companies and their shareholders reportedly oppose the proposed restructuring. They are also unwilling to finance the process.
Pricing Mechanism Remains a Major Challenge
The proposed reforms would require a mechanism to equalise gas sale prices across the new companies. Officials are considering a weighted average sale price system or another suitable pricing arrangement.
However, the final decision may require consultations with provincial governments and other stakeholders. There is also a possibility that the Council of Common Interests will need to approve the mechanism.
This issue could affect the timing of the transaction adviser’s appointment. The adviser’s terms of reference would depend on the pricing structure eventually agreed upon.
For now, questions remain over the feasibility and timing of the proposed gas-sector overhaul. Some stakeholders also oppose creating five or more entities before an independent transaction adviser completes a detailed assessment.
If approved, the restructuring could significantly change Pakistan’s gas industry. The government will therefore need to balance private-sector opportunities with affordability, provincial interests and the financial sustainability of the new companies.
