Massive gas deficit in upcoming winter: Centre endeavours to convince federating units on WACOG

ISLAMABAD: After failure to get nods on introduction of Weighted Average Cost of Gas (WACOG) at the Council of Common of Interests (CCI) from three federating units, including Sindh, Balochistan and Khyber Pakhtunkhwa, the federal government has once again arranged a special meeting with the provincial representatives on huge gas deficit as in the upcoming winter as the local gas production would virtually dwindle up to 3.2 bcfd, which is under use, and the reliance on the imported Re-Gasified Liquefied Natural Gas (RLNG) would be increased. Meanwhile, the fact is the sitting government also wants to blend RLNG with the local gas, and would try to introduce the Weighted Average Cost of Gas (WACOG), which is so far not acceptable by Sindh, Balochistan and the KPK.

The prime minister decided to appear himself in the meeting scheduled on Wednesday with the provincial representatives, either the chief ministers or their energy ministers apart from other stakeholders, including all top officials of the Petroleum Division to convince the provinces in favour of introduction of WACOG in general and Sindh in particular.

The issue of blending RLNG and the local gas was initiated by the federal government in the last CCI meeting, but the three federating units strongly refused to accommodate the argument, saying the distribution of natural gas is governed by the Article-158 of the Constitution. This is analogous of granting hydel profits to Khyber Pakhtunkhwa and the Punjab based on the Article-161 (2) of the Constitution.

Sindh wanted the energy ministry (Petroleum Division) to desist from any attempt to include RLNG into the WACOG formula for determination of the tariff of natural gas and demanded to assure supply of locally produced natural gas to its consumers. "If the WACOG is introduced, then the cost of local gas for the industrial sector in Sindh, Balochistan and KPK would be increased. However, the gas price for the industrial sector in Punjab would tumble," a senior official told The News.

Pakistan is going to face a massive gas deficit in the coming winter, as the local natural gas is quickly depleting, and the current standing is at 3.2 billion cubic feet per day (bcfd). Pakistan has the capacity to import 1.2 bcfd LNG that accumulated at 4.4 bcfd against the total demand of over 6.5 bcfd. The federal government said the country's reliance on imported gas would increase in the coming years unless a major gas discovery would be made. Hence, it wanted to blend the RLNG into the local gas for average price mechanism.

Meanwhile, Sindh said in a letter to the prime minister that the federal government’s endeavor is quite inappropriate and unconstitutional, as import of RLNG is solely for the Tier-II category of natural gas consumers under the ring fenced tariff arrangements and the existing Tier-I consumers of natural gas under WACOG base tariff, could not bear the burden of high cost of imported RLNG.

Sindh further mentioned that any attempt to work out a natural gas tariff by including the RLNG into the existing WACOG of indigenously produced natural gas is gravely disturbing and illegal. The Sindh government has categorically rejected any unconstitutional and illegal proposal to change gas tariff mechanism. "Sindh is the largest producer of natural gas and its consumers shall not be burdened with the high cost of RLNG," disclosed a letter of Sindh CM addressed to the prime minister in January 2020.

The letter also mentioned that Sindh produced natural gas between 2,500-2,600 mmcfd and the quota of SSGCL for its two franchised provinces i.e. Sindh and Balochistan varies between 1,200-1,300mmcfd. While Sindh currently received an average 900-1,000mmcfd of natural gas against its constitutional right of 2,500-2,600mmcfd. It even defied common sense that Sindh on the one hand is deprived of its constitutional share of 2,600mmcfd at Rs520.54 per mmbtu as, on the other hand, also being asked to buy it at Rs1,690 per mmbtu.