For private companies: SNGPL seeks hike in gas transportation, distribution tariff

ISLAMABAD: The Sui Northern Gas Pipelines Limited (SNGPL) has sought an increase in gas transportation tariff of Rs184 and distribution tariff of Rs614 per MMBTU for the FY 2004-25 against the tariff for FY2023-24 for the third party -- the private company that purchases gas from a exploration and production company and sells it to bulk consumers by using the infrastructure of the gas company.

The Oil and Gas Regulatory Authority (Ogra) on Friday held a hearing at the office of Sui Southern Gas Company (SSGC) in Karachi on the petition of Sui Northern.

During the hearing, The Sui Northern CFO said that his management is encouraging the private companies to use its pipeline infrastructure and pay the rent to the gas utility, and right now one company is in business with the SNGPL on this account and many are approaching the management for using the transmission and distribution system.

He pleaded that the transportation tariff of RLNG from Karachi to Lahore should be the same as the transportation and distribution tariff of local gas so that the consumers in Punjab and Sindh could benefit from it. However, the SNGPL didn’t come up with any solid rationale for an increase in transportation and distribution tariff except showing one slide during the hearing.

However, the Ogra member finance said that the objective of holding the hearing in the SSGC office is to let the people know that the private sector is working in the SNGPL system, and there is a need that the Sui Southern management also encourage the private sector to purchase gas from any well and sell it to its clients by using the SSGC infrastructure.

However, Universal Gas Distribution Company CEO Ghyias Paracha in his arguments said that there is no need to increase the transportation and distribution tariff. He stressed for the same tariff for gas transportation and distribution as this would help reduce gas price for 75 percent consumers.

“Under the existing system, 25 percent of consumers who are connected with transportation pipelines get cheaper gas. If transportation and distribution tariffs becomes the same, then 75 percent of consumers would benefit and this is how the overall gas tariff would slide down. He also pointed out that for the last 15 years, UFG (unaccounted for gas) has been the same at a higher side. He said that serious efforts needed to be launched at a sustainable level to bring down the UFG. He also suggested Ogra to reduce the port charges and margins of companies so that the RLNG price could be reduced which is imported at cost of $9-10 per MMBT but Ogra set its price at $14 per MMBTU because of port charges and margins of PSO, PLL, and Sui companies.

He also said that the SSGC and SNGPL should cooperate with the private companies so that the private sector could play its role. It would be a win-win situation for both Sui companies and the private sector.

However, he said that both the managing directors of Sui Northern and Sui Southern have the same background of finance as both remained CFOs and they should sit with Ogra and private sector companies and thrash out the strategy to reduce the transportation and distribution tariff so that the gas prices could fall.

He said that the gas which is not being sold should be given to the private companies so that they sell the said gas and pay the rents to the sui companies as well, and this is how the gas price would stabilise and then start reducing. He argued that Sui companies sell some gas of which price recovery is not being made and likewise RLNG is diverted to the domestic sector and its price is not being recovered which is why the tariff is increased every time making the lives of all consumers miserable. The non-recovery of the prices of the gas is causing more increase in gas circular debt. This is an alarming situation that can lead both the Sui companies to default, he warned.