This is with reference to a letter titled "Gas price increase" from Maqbool Ahmed, Secretary, Landhi Association of Trade and Industry, published in your esteemed newspaper on 6th May, 2006.
The letter was written in the context of OGRA's public hearing, held on April 19, 2006, in which a petition was discussed, for increasing the price of natural gas for industrial and commercial customers.
As far as the writer's comments and conclusions with respect to the government's pricing policy or its predisposition towards any particular sector is concerned, we are neither competent to respond to them nor make any observations.
However, we would like to take this opportunity to explain the pricing mechanism applicable to natural gas, for the benefit of the general public.
Natural gas prices charged to customers have a direct link with the "well-head price" of gas that companies like SSGC pay to E&P companies when we buy gas. The "well-head price" in each case is determined by the government, on the basis of a formula using a basket of international crude oil prices.
If the price of crude goes up in the international market, as it has rather dramatically in the recent past, the "well-head price" payable to E&P companies are revised upwards. By the same token, in case crude oil prices do go down, the price of natural gas too may be reduced.
The average "well-head price" of natural gas as applicable to SSGC, increased by 16.9% between 2005-2006 over 2003-2004, from Rs 131.05 per MMBTU to Rs 153.20 per MMBTU.
However, it may be noted that SSGC was able to reduce its operating cost during this period from 7.15% to 6.14%. This was only possible as a result of higher efficiencies and a strict vigil maintained on costs.
As a customer-oriented model gas utility, SSGC not only endeavours to provide uninterrupted supply of natural gas to all its customers, but do so in a cost-efficient manner. This is part of our commitment towards providing the best quality service to all our customers including industrial and commercial customers.
(The writer is head of Corporate Communications, Sui Southern Gas Company)
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