Sunday May 19, 2024

SNGPL seeks 147pc gas price hike, 3rd time in one year

The decision on the matter would be made by Ogra after conclusion of the public hearing in Peshawar

By Israr Khan & Khalid Mustafa
March 25, 2024
An office of Sui Northern Gas Pipelines Limited (SNGPL) can be seen in this undated image. —SNGPL Website/File
An office of Sui Northern Gas Pipelines Limited (SNGPL) can be seen in this undated image. —SNGPL Website/File

ISLAMABAD: The Oil and Gas Regulatory Authority (Ogra) is convening a public hearing in Lahore on Monday (today) on a petition submitted by the Sui Northern Gas Pipeline Limited (SNGPL), seeking a huge 147 percent increase in gas prices for the Fiscal Year 2024-25.

If the proposed third increase within a year is sanctioned, it is anticipated to substantially hike the inflation rates and overburden the poorer segments of the society.

The SNGPL, catering to over 7.22 million consumers in North Central Pakistan, predominantly in Punjab, Khyber Pakhtunkhwa and Azad Jammu and Kashmir, faces a projected revenue shortfall of Rs189.18 billion. The proposed gas price surge is slated to take effect from July 1, 2024.

The company aims to elevate the average gas price to Rs4,446.89 per metric million mmBbtu, reflecting a hike of Rs2,646.18 per mmBtu.

The anticipated price of Rs4,446.89/mmBtu encompasses previous year’s shortfalls in the natural gas business. Furthermore, the SNGPL has asserted a cost of service for regasified liquefied natural gas (RLNG) at Rs325.08 per MMBTU for the same period.

Following the Lahore hearing, the Ogra would convene another session in Peshawar on March 27, with the regulator believing it would provide ample opportunity for stakeholders, consumers and the general public to voice their grievances.

The decision on the matter would be made by Ogra after conclusion of the public hearing in Peshawar.

The Ogra, previously on 18th and 20th of this month, conducted public hearings in Karachi and Quetta in response to a petition from Sui Southern Gas Company (SSGC). The SSGC, in its plea, advocated for an increase in gas price by Rs274.40/mmBtu, citing an estimated revenue shortfall of Rs79.63 billion. The company urged OGRA to set the average price of one mmBtu gas at Rs1,740.80.

The SSGC’s petition encompasses projections for the average prescribed gas price and RLNG cost of service for the fiscal year, aiming to cover gas costs, operating expenses and return on assets. Additionally, SSGC’s petition addresses issues such as gas supply volume projections from local gas fields, measures taken to meet the country’s escalating energy demand and infrastructure investments to connect new areas.

In a related development, the textile industry has decided to challenge the massive increase in gas tariff sought by the SNGPL.

During the Ogra hearing, the All Pakistan Textile Mills Association (Aptma) and Lahore Chambers have decided to fully oppose the SNGPL’s petition.

The Aptma would question all the assumptions and projections in the petition about the RLNG diversion to the domestic sector in 2024-25 and also about projection claimed under the cost of gas, including RLNG and LPG Air Mix Subsidy at Rs702.411 billion.

The textile industry has also decided to take on the Sui Northern on high UFG (unaccounted for gas) in its network which is at 12%, 5-6 times higher than international benchmarks.

The SNGPL is seeking a diversion cost of Rs298 billion in the petition, about $1 billion, with cross-subsidy to be borne by industries, assuming SNGPL plans to expand its network, spending tens of billions of rupees to increase domestic consumption, resulting in higher service costs and more domestic RLNG diversion. For this, the Sui Northern will expand the pipeline infrastructure with working capital of Rs56.754 billion.

The textile industry would also seek the rationale behind the expense of LPS (late payment surcharge) and Working Capital (Rs125.3 billion) and the reason and justification for demanding huge operating expenses against LPS payment to creditors and financing cost for working capital Rs125.322 billion in the backdrop of regular gas sale price revision by the federal government.

During the hearing, it would also seek an evaluation of capital expenses amounting to Rs21.520 billion and revenue expenses amounting to Rs1.949 billion claimed for UFG control activities in view of 7.25% UFG projected by the company.

Domestic sector consumption in the SNGPL network increased by more than 4% from 310 BCF in FY2022 to 323 BCF in FY2023 with the highest UFG rates and cost of service.