Govt engages WB to make bleeding gas companies efficient

ISLAMABAD: The federal government has 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, a senior official of the Ministry of Petroleum and Natural Resources told The News.

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 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 than the local gas production that 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 will 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 future keeping in view the new scenario.  The gas pricing regime is needed to be two-tier gas pricing formula or not. Pakistan is 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 than the domestic gas production, the two-tier gas pricing regime will not last and in that case on-tier gas pricing regime after mixing local and imported gases will be applicable or not. On this particular issue Word Bank’s advice has been sought.

And to this effect, the World Bank here on Wednesday initiated the consultative process with stakeholders which include the top mandarins of Ministry of Petroleum and Natural Resources, gas companies, industrial sector, CNG sector. And the said consultative process will also take place today (Thursday) on how to increase the capacity of Ogra keeping in view the new  changes taking place in the oil and gas sector both in Pakistan and abroad. In addition, the legal and constitutional aspects pertaining to the oil and gas sector will also be deliberated.

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.

According to the Federal Minister for Petroleum Shahid Khaqan Abbasi, who also participated in the consultative process, the Work Bank is engaged with energy sector for the last one year and will come up with the procedure on how to make the gas sector efficient keeping in view the new environment.

The government, the official said, also wants the World Bank to come up with recommendations to deal with the issues the gas sector is facing since 18th Amendment is introduced in the constitution owing to which the provinces’ role in oil and gas sector has enormously increased. 

“The business of running the gas sector cannot run as usual any more keeping in view the new dynamics taking place in oil and gas sector.” The official argued saying that Work Bank has embarked on a consultative process and still has a long way to go. The bank will also go to provinces to have their inputs for shaping up the far reaching future gas sector regime.

“We are still operating in old regime despite the fact that the new product of LNG is coming in and the rationale on which the old regime was carved out is no more relevant with the new dynamics taking place in Pakistan’s gas system.”

More importantly, the official maintained, the gas companies which have been getting 17 percent rate of return on assets for decades are still applicable or not 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 pitched his argument.