ISLAMABAD: In a major development, the government has carved out a plan to entirely change the country’s existing gas infrastructure outlook by making four gas distribution companies and one gas transmission company out of the Sui Southern and Sui Northern gas companies, which is necessary after the passage of the 18th Amendment.
This will make the gas sector more efficient, which is currently bleeding with line losses of over 10 percent.This means each province will be having its own gas company. The Sui Northern Gas Company Limited will be unbundled into the Punjab Gas Company and KP Gas Company. Likewise, Sui Southern Gas Company will also be unbundled into Sindh Gas Company and Balochistan Gas Company.
In addition, a gas transmission company will also be made. This has been revealed in the plan chalked out by the Ministry of Petroleum and Natural Resources, a copy of which copy is available with The News.A crucial meeting of four provincial ministers concerned, to be headed by the Federal Petroleum Minister Shahid Khaqan Abbasi, has been convened today (Monday) in Islamabad.
In the meeting, the Centre will take the four provinces into confidence on carving out the four gas distribution companies and one transmission company.Talking to The News, Shahid Khaqan Abbasi confirmed the development saying: “The business of running the gas sector cannot be run as usual anymore keeping in view the new dynamics taking place in the oil and gas sector.
“We are still operating in the old regime despite the fact that the new product of LNG has come in and the rationale on which the old regime was carved out is no more relevant to the new dynamics taking place in Pakistan’s gas system.”
The minister said there was no pipeline at the moment that could bring the RLNG (re-gasified liquefied natural gas) from south to north. Currently, the RLNG is injected in the system of Sui Southern and against the amount of imported product which is injected in the southern system, the Sui Northern attains the same amount of gas from Sui Southern in the shape of local gas, meaning that a swap of RLNG with local gas is taking place.
“We need to have the pipelines dedicated for transportation of RLNG from southern part of Pakistan to the northern part. For this, the project to augment the pipeline system is underway and in addition, another 1,100 km pipeline will be laid down from south to north by a Russian company,” the minister explained.
The new paradigm shift in the existing gas infrastructure is imperative particularly when it comes to allocating the share of RLNG to the provinces. The minister said in the Gas Transition Company, four federating units, should they want, can have shares.The minister said that the World Bank and Asian Development Bank are currently extending their technical assistance to the proposed plan.
The federal government, to this effect, has already engaged the World Bank seeking its advice on how to carve out a future strategy to make the bleeding and loss making gas sector, with huge infrastructure of pipelines network, efficient keeping in view the depleting local gas reserves and increasing imported gas in the system.
To this effect, on July 19-21 the Gas Sector Reforms Committees meetings were held with the World Bank officials in Islamabad. Three Gas Sector Reforms Committees have been constituted in close liaison and collaboration with the World Bank to discuss restructuring of the Natural Gas Sector of Pakistan, which is presently meeting 50% primary energy supplies in the country being the mainstay of the energy sector and economy of Pakistan.
The purpose behind this exercise of immense national importance is to restructure gas sector with an overall aim of making the sector efficient, dynamic and vibrant in keeping with best international industry practices. All stakeholders have been taken on board in this highly participatory consultative process.
It is pertinent to mention that the World Bank has also been advising the government for many years to unbundle the gas companies —- Sui Southern and Sui Northern — into transmission and distribution entities, as this will help make the gas sector more transparent and efficient.
The World Bank’s advice has also been sought to cope with the gas pricing regime under the new scenario under which in case no major local gas discovery is made, then the indigenous gas reserves which are fast depleting will decrease while the imported LNG volume size will increase and in the next three to four years time Iran-Pakistan (IP) and TAPI (Turkmenistan-Afghanistan-Pakistan-India) TAPI gas pipeline will also be operational meaning that the intake of imported LNG and gas will increase. The local gas production currently hovers between 3.8 to 4 billion cubic feet gas per day.
Five LNG terminals are being constructed which will be having the capacity to import 2.7 bcf per day and IP will import 750 mmcfd and TAPI 1.3 bcf per day. And the imported gas will stand, after three to four years, at 4.150 which will increase than the local gas production.
The government is not clear on what kind of gas pricing regime should be in implemented in future, keeping in view the new scenario.
Pakistan has currently two types of gas — imported and local. Textile, fertilizers, CNG and power sectors are using the LNG under ring fencing regime.
However, the domestic, commercial and some industrial players are using the domestic gas. But in future when the flow of imported gas volume in gas system increases, then the domestic gas production, the two-tier gas pricing regime will not last and in that case one-tier gas pricing regime after mixing local and imported gases will be applicable or not. On this particular issue, the World Bank’s advice has been sought.
The officials, who are part of the consultative process, said that the government had told the World Bank that in the distribution system the line losses had jacked up to 30 percent that are taking place while providing gas to commercial, CNG and domestic sectors.
More importantly, the official maintained, the gas companies which have been getting 17 percent rate of return on assets for decades are still applicable and the same case is with the UFG (unaccounted for gas) that has been determined by Ogra at 4.5 percent, which is far away from the reality.
“Reality always bites as the overall transmission and distribution losses stand at over 10 percent,” the official saying by pitching his argument.
