The price increase allowed by the Oil and Gas Regulatory Authority (Ogra) for financial year 2006-07 with regard to gas tariff fixation in a petition filed by the SSGC, would be effective from July 1, after the government''s approval.
In a statement issued the Sui Southern Gas Company (SSGC) clarified on Friday that the price increase of Rs 29.80 per MMBTU as against Rs 31.52 per MMBTU would be effective from the coming fiscal year (July 1, 2006). Meantime, the government may elect to adjust or rationalise prices, as it deems fit, to reduce the impact on certain categories of customers including industrial customers in accordance with its national economic policy.
The price increase allowed to SSGC ie 7.2 percent for domestic customers and 15.95 percent for other categories, including the commercial and industrial sectors (but excluding fertiliser plants'' who use natural gas as feedstock), is also required to offset the anticipated increase in the weighted average purchase price of gas of Rs 27.28 per MMBTU, which the company has to absorb as its "cost of gas" and has no control over.
The meagre amount of Rs 2.52 per MMBTU left as a result would pay for normal increases in the company''s operational costs to ensure sustained supply of gas to customers across its franchise areas in Sindh and Balochistan.
The basic rationale for the SSGC''s petition to Ogra, requesting an upward revision in customer prices, was the anticipated increase in weighted average wellhead price of natural gas from Rs170.52 per MMBTU last year to Rs211.08 per MMBTU in the year 2006-07, over which the company has no control.
The wellhead prices allowed to gas producers by the government are linked to a basket of crude oil and High Sulphur Fuel Oil (HSFO) prices in the international market. This is as per the terms of contracts signed between the Government of Pakistan and the Exploration and Production (E&P) companies as per international norms and standard Gas Purchase Agreements (GPA), which are essential to attract heavy investments in exploration and production by world-class oil and gas companies.
It may be pointed out here that customers of natural gas in Pakistan do not bear the full brunt of the increase in the price of crude in the international market.
It is for common knowledge for instance that average crude oil, cost and freight (C&F) price applicable for FY 2004-05 was $35.21 per barrel which on average increased to $50.09 per barrel applicable for FY 2005-06.-PR
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