Provinces seek control over gas production, transmission

ISLAMABAD: The provinces have demanded of the federal government to give them full control over gas production, transmission and distribution, otherwise the central government’s proposed move of unbundling the two main state-run natural gas utility companies into four and setting up a single gas transmission company will be unacceptable to them and can the challenged in the apex court.

Three provinces, except the Punjab, have asked the Centre to take the matter of the unbundling of Sui Southern Gas Company (SSGC) and Sui Northern Gas Pipeline Limited (SNGPL) to the forum of the Council of Common Interests (CCI) and also warned the federal government that they will go to the Supreme Court against any unilateral decision, a senior official privy to the development said.

According to the central government’s proposed plan, the provinces will be given only the distribution rights in their respective jurisdictions, but in a meeting with Federal Minister for Petroleum & Natural Resources Shahid Khaqan Abbasi, the representatives of these three federating units on Monday expressed reservations, saying that only giving them the right of distribution will be just burdening the provinces with unjustified unaccounted for gas (UFG) while depriving them of oil and gas royalties.

Provincial representatives also conveyed to the minister that only distribution rights to them means burdening three provinces, the AJK, Fata and the Northern Areas for the sake of Punjab.

However, the federal government strongly disagreed with the provinces’ demand of owning production rights, as  production involves international agreements which cannot be transferred to the provinces. Besides the provinces don’t have the capabilities to deal with the production matters, representatives of the federal government claimed. These provinces have also demanded their representation in the Directorate General of Petroleum Concession (DGPC) and Oil and Gas Regulatory Authority (Ogra) prior to unbundling of the gas utility companies.

It is worth mentioning that the Petroleum Ministry with the support of the World Bank intends to separate gas transmission from distribution and split the two utilities of Sui Southern Gas Company and Sui Northern Gas Pipeline Limited into four distribution companies.

This aims at importing LNG by Punjab using transmission system not financially linked with distribution. Since all the provinces will rely on the same transmission system, therefore, they have to pay for the development of Punjab specific transmission line.

The provinces also expressed reservation over the burden of line losses on the provincial kitty. Sindh, KP and Balochistan with separate distribution will be in loss and royalties from oil and gas will be used to pay for exaggerated Unaccounted for Gas (UFG). And thus the huge cost of gas transmission to Punjab will be shared by all the provinces. “Why a consumer in Balochistan, KP or Sindh should pay for the consumer in Punjab,” a provincial representative asked.

The three provinces have, therefore, demanded to hand over the transmission to the provinces so they will arrange for their own supply lines, the source said.

But to own a transmission line, there must be a reliable production system which can ensure smooth supply of gas. The provinces have, therefore, demanded to hand over gas production to the provinces.

KP targeted the World Bank and said that by manipulating the figures provided by the Petroleum Ministry and SNGPL, the bank study has tried to prove that giving gas connections in Karak, Kohat and other part of KP are more expensive than Lahore.

The whole premise of the World Bank study is based on the imports of LNG and isolating KP and Balochistan, the representative of KP alleged.Both KP and Sindh have challenged the figures and methodology and had totally disagreed with the approach and ToRs.