Sui gas firms allowed maximum claims on losses

KARACHI: Oil and Gas Regulatory Authority (Ogra) allowed Sui gas companies to lodge maximum of their claims on account of theft and losses, bringing to an end frequently emerging conflict of interest on unaccounted for gas (UFG), its official said on Wednesday.

“Ogra decided to end the years-old controversy and unnecessary prolonged ligation on this account specially after considering the meagre financial impact of the same on consumers and decided to allow the maximum of the claims made by the Sui companies on account of theft and law and order vis-à-vis the benchmark of 2.6 percent,” Imran Ghaznavi, the authority’s spokesperson said.

“The regulator will also be cognizant of the fact that it is also bound by certain laws and cannot take arbitrary decisions in the name of the best interest of the consumers, as had this decision not been taken, the equity of SSGC (Sui Southern Gas Company) would have been wiped out and it would become simply a burden on the national exchequer.”

The decision was taken in line with the direction of the federal cabinet and the Supermen Court’s decision on implementation of policy guidelines. “It is up to the Sui companies to improve their performances and become sustainable in future as they cannot expect to be bailed out by the federal government always,” Ghaznavi added.

“The Sui companies need to control their UFG losses which are simply not possible without internal collusion.” SSGC claimed a maximum of 2.44 percent as against Ogra’s permission of 1.57 percent during the fiscal year of 2012/13 to 2016/17, thus 0.87 percent was further allowed.

Sui Northern Pipeline Limited (SNGPL) claimed 3.29 percent for the same years as against Ogra’s limit of 2.49 percent. Ogra limited their claims to a maximum of 2.6 percent and the financial impact of which will be staggered in the next five financial years which amounts to an increase of less than Re0.50 per million metric British thermal unit.

The Economic Coordination Committee of the cabinet directed Ogra to allow certain volumes for 2012/13 to 2016/17 due to UFG losses on factors beyond control of the Sui companies subject to the final study on UFG to be conducted by Ogra.

The UFG study recommended 2.6 percent on account of factors beyond control and was linked to certain key monitoring indicators.

The petroleum division said the very purpose of the UFG study is to provide realistic UFG benchmark linked with efficiency as well as to address the adjustments/provisional determinations of UFG disallowances, which are to be reconciled and adjusted subsequently.

The division proposed that Ogra might reconcile and finalise/adjust the provisional UFG benchmarks set from FY2012/13 to 2016/17 in pending/next determinations of revenue requirements of the Sui companies in line with the recommendations of the UFG study i.e. the benchmark set at 7.6 percent (fixed benchmark of five percent plus UFG of 2.6 percent for local conditions) so as to ensure that the gas companies continue to remain financially viable and sustainable.