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March 25, 2018

Sui Northern faces Rs20 billion loss


March 25, 2018

ISLAMABAD: The Sui Northern Gas Pipeline Limited (SNGPL) has landed in deep water after failure in the recovery of full price of costly RLNG which was extended to the residential sector to the Punjab in the winter season for 90 days.

The RLNG of almost 250 million cubic feet per day was provided to the residential sector for the three months in the winter season apparently to avoid any wrath from the masses over gas shortage.

The said political decision has emerged as threat to the financial health of the Sui Northern as the gas company can only recover the cost of the residential gas tariff which is very low if compared with the full cost of the RLNG that currently hovers around at Rs1350 per MMBTU.

Now the Petroleum Division is in process in preparing the summary asking the government to either pay the amount to offload the differential cost amounting to over Rs20 billion in the head of subsidy or to recover the cost from the Punjab’s industry, a senior official dealing with the issue said.

The Managing Director of Sui Northern Amjad Laitf denied any development about any kind of summary being made to recover the loss of differential cost of LNG extended to domestic sector. He said that factuality textile sector wants the subsidy for not being provided the system gas in the peak winter season as the government wants the domestic sector to have the full system gas so the textile was provided RLNG all the time in peak winter season. Normally RLNG was provided system gas for two day in week and in remaining 5 days, the said sector is provided RLNG. They are asking for the payment of differential and the petroleum division is working on it. About RLNG to domestic sector he said that the cost would be recovered through adjustment with Sui Sothern as currently under swap system Sui Southern gets the imported RLNG and against it, it provides the same amount of its own gas to the Sui Northern. So far Sui Southern has not provided the gas of 17000 million cubic feet of gas which is due against the import of RLNG and when this amount of gas is received and adjusted the loss in the head of RLNG provided to Punjab domestic sector would be adjusted.

However, the sources insisted that the petroleum division is preparing a summary seeking the differential payment from the government in the shape of subsidy or asking the government to allow Sui Northern to recover the differential from the Punjab’s industry.

The News in its edition of January 19, 2018 had filed the story with headline: “Costly RLNG being provided to the domestic consumers of Punjab.” The theme of the story was that the residential consumers may be charged of the full price of RLNG. In the said story, Sui Northern MD had admitted that the RLNG was being injected to the domestic sector saying it would be having no financial repercussions on the domestic gas consumers as they will not pay more for using the costly gas as in the winter season. He had argued saying when the electricity demand increases manifold in summer peak season, the gas intake to thermal power houses will increase as the gas demand in domestic sector in summer season remarkably decreases.

“So, there will be no effect on domestic consumers financially by using the RLNG in winter season,” Amjad Latif had contented. He had said that it is all about the gas load management in winter season. He admitted that there is a gas reserve bank which is being used as tool to manage the gas distribution both in summer and winter season. He explained in a country like Canada, the old depleted gas wells are used as gas reservoirs in summer, as the surplus gas in summer is injected in the said depleted wells from where the gas is used for winter season, but that kind of facility our country doesn’t have. “However, we have established gas reserves bank which is an innovative idea and is being used for gas load management,” Latif had reiterated. However, the RLNG supply to domestic sector will have no financial impact on domestic consumers, as the bulk consumers that include power, industrial, fertilizer and CNG sector will ultimately pay the RLNG cost. Now under the latest scenario, the situation is otherwise as the petroleum division on behalf of Sui Northern is preparing a summary for ECC asking the government to pay the differential cost in the shape of subsidy or recover from the Punjab Industry (textile, CNG and fertilizer sectors).

More importantly the government has reduced the RLNG intake in the country to 750 mmcfd from 1000 mmcfd as only one RLNG based power plant out of the three will come on stream in the month of April. Interestingly the textile industry in Punjab has also reduced the intake of RLNG to just 100 mmcfd saying the imported products is too high in terms of cost and since it has increased the cost of doing business manifold.

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