Imported gas diversion to consumers by SNGPL: RLNG consumers to pay Rs73.848 billion

ISLAMABAD: The government is making up its mind to allow the Sui Northern Gas Pipelines Limited (SNGPL) to recover Rs73.848 billion from the RLNG consumers against the injecting of costly products to domestic and commercial consumers in last two winters for 2018-19 and 2019-20 respectively.

The Sui Northern has been compelled under the government policy to divert the costly product to domestic and commercial consumers to avert the backlash from masses in last two winters. However, from March 2020 onward the costly RLNG is still being provided to date, as the local gas production activities have dwindled on some gas fields because of COVID-19 pandemic.

The recovery of the huge amount of Sui Northern from domestic consumers is not possible as the tariff of this category of consumers is different and at lower side.

However, the non-recovery of huge amount of Rs73.848 billion has multiplied manifold the financial miseries of Sui Northern and because of this vey issue, Sui Northern has defaulted the payments of Pakistan State Oil (PSO) and Pakistan LNG Limited (PLL).

“And because of non-payment by Sui Northern, the PSO has already defaulted in payments of the international LNG supplies twice in recent past. And to this effect Petroleum Division has prepared a draft for ECC andcirculated it with various economic ministries for their comments,” the relevant officials told The News.

According to the summary prepared by Petroleum Division, SNGPL has worked out diversion of the volume of RLNG to the domestic and commercial consumers in last two winter seasons of 2018-19 and 2019-20 according to which in the month of December 2018, 209 mmcfd RLNG is diverted to domestic and commercial sector, in January 2019, 367 mmcfd, in February 2019, 324 mmcfd and in March 2019, 186 mmcgd RLNG was diverted.

And for 2019-20, the said gas company diverted the 138 mmcfd RLNG to domestic and commercial consumers in month of November 2019, and in December 2019, 266 mmcfd RLNG is diverted, in January 2020,472 mmcfd, in February 2020, 386 mmcfd and in March 2020, 130 mmcfd RLNG.

As per the said working SNGPL is faced with revenue shortfall of Rs73.848 billion for diversion of RLNG volumes to domestic sector especially during past two winter seasons.

As of now this shortfall has compounded impact of reduction of system as from some fields with the onset of COVID-19 pandemic, which has compelled the Sui Northern to divert RLNG to meet the demand of domesticand commercial consumers from March 2020 onwards.

The said differential is subject to the change based on actual volumes diverted in the winter and summer months and recouping of shortfall during the months when system gas has been sold as RLNG, Sui Northern will be required to present a proper case with data sheet before Ogra for validating its claims of RLNG diversions.

Petroleum Division is of the considered opinion view that the due to severity of weather during past winter seasons, SNGPL was constrained to inject RLNG in system to meet the demand of domestic and commercial consumers which was in line with ECC’s approved policy guidelines, the resultant tariff or RLNG revenue shortfall is now being compounded in the absence of recovery mechanism whereas under the RLNG ring-fenced pricing mechanism, recovery of RLNG related shortfall can only be made through monthly RLNG pricing.

As per the summary, Petroleum Division firmed up its proposals seeking ECC permission allowing Sui Northern to recover the RLNG revenue shortfall amounting to Rs73.848 billion due to diversion of RLNG for meeting the demand of domestic and commercial sectors through the monthly RLNG sale pricing from all RLNG consumers subject to some terms and conditions that include (i) Ogra will provisionally allow the recovery of RLNG revenue shortfall considering the month-wise actual RLNG volumes diverted in the domestic and commercial sector by SNGPL and any amount available in the deferral account would also be adjusted while actualizing the RLNG sale price; (ii) Ogra may create a specific head under the RLNG Sale Price for charging diversion cost in a stagger manner; (iii) Upon merger of PLTL and PLL the revision in the margin in RLNG pricing being provided to these companies will be reviewed and would be considered to off-set the increase in the sale price of RLNG on account of diversion cost recovery;(iv) Upon amendment in Ogra Ordinance, 2002 for bringing RLNG in the WACOG (weighted average cost of gas), the balance RLNG revenue shortfall by the amendment is made, if any, would be recouped through revenue requirements in a staggered manner.