RLNG diversion to domestic sector rises to 450mmcfd

ISLAMABAD: The RLNG diversion to the domestic sector has surged up to 450mmcfd in the ongoing month of January 2025 in the jurisdiction of Sui Northern which was at 250mmcfd in December 2024, causing more increase in the circular debt in gas sector.

The current average domestic tariff stands at Rs1,250 per MMBTU whereas the RLNG tariff stands at Rs3,600 per MMBTU. The delta of loss of Rs2,350 per MMBTU would appear in the circular debt.

“The estimated loss to be incurred on account of RLNG diversion to domestic sector from November 2024 to March 2025 has been estimated to be over Rs200 billion which will appear in the gas circular debt. If it is made through the revenue requirement of the gas company, the increase in gas tariff will be exorbitant,” a senior official at the Petroleum Division told The News.

The Sui Northern says that the domestic demand has increased to 950mmcfd out of which 450mmcfd is being supplied to domestic consumers. In the month of December, the domestic sector was provided RLNG of 250mmcfd. It says that in February 2025, the demand of domestic sector would plummet, so the RLNG diversion in February would also reduce.

The data available with The News also shows that the domestic sector in SNGPL jurisdiction has become the biggest client of RLNG as the domestic sector is being provided 450mmcfd, power sector 352mmcfd, and export and non-export industry 200mmcf.

However, the cost of RLNG diversion of Rs260 billion to the domestic sector during the period from FY19 to October 2023 has not been recovered so far and it has become a part of the circular debt of Rs2.7 trillion. Officials said out of Rs2.7 trillion circular debt, Rs1 trillion had been added just because of no increase in gas prices in the last 10 years.

On the issue of LNG transactions, the government is bound to pay the LNG cargo cost within 10 days after it is offloaded, but one month is consumed by the gas companies in the billing process, another 10 days are consumed in recovery of bills and 5-10 days are used in reconciling the bills.

The whole process consumes 50-60 days. When the recovery of gas bills takes place in 60 days, 6 cargoes are offloaded. So the government wants to cap the RLNG diversion limit to the domestic sector apart from improving the bill recovery.

Right now, there is a gap of 60 days between recovery and payment cycles, which haunts the government functionaries. The government wants the gas companies to borrow the working capital till the recovery of bills to pay off the LNG cargoes’ cost.

However, Ogra in its latest determination has allowed Sui Northern to charge the consumers Rs8.54 billion in FY25 in the head of the financing cost to keep the RLNG supply chain afloat.