PMIC report urges Ogra to clearly define UFG in energy terms

The role of Oil and Gas Regulatory Authority (Ogra) has been far below the conduct expected from an independent and prudent regulator, Prime Minister Inspection Commission (PMIC) report revealed on Monday.

Not only has Ogra complied with the formal "Policy Guidelines" of the government which are inconsistent with the provisions of Ogra Ordinance, it has caused significant confusion through formation of rules and decision making which are contradictory to each other.

The prime minister directed the PMIC to undertake an inspection of the national issue of unaccounted for gas (UFG) and submit recommendation to address the problems. The report recommended that definition of UFG benchmark and its progressive implementation in line with international standards (around four percent with progressive downward movement).

It further recommended Ogra to do necessary amendments in NGTR (2002) and OGR (2018) for clearly defining UFG in energy terms (MMBTU) and standardize energy reconciliation process for determination of UFG/loss. The same standard be applied to Sui companies, and all market players under third party access regime.

Policy guidelines, which are not inconsistent with the Ogra Ordinance, should be reissued along with necessary corrections of previous guidelines. The report states, "Examples are varying treatment of UFG in NGTR (2002) and OGR (2018) as well as allowances for UFG volume given to SSGC based on energy equivalence of gas. The role of director general PC for upstream sector efficiency/UFG control was realized for the first time in June 2017 with identification of anomalies at five gas fields; however, corrective efforts initiated by the DG PC were abruptly stopped in December 2017 for reasons unknown."

It has been recommended in the report that a "new UFG concept" built on inherent gas energy efficiency concept needs to be defined from gas producer/importer to bulk consumers as:

i) (Gas Energy measured at Inlet-gas energy measured at outlet) plus gas energy measured at Inlet-across wellhead gathering pipelines, processing plant, FSRU, across transmission network, across distribution networks.

ii) Energy reconciliation (rather than volumetric reconciliation) across every component of gas supply chain.

It further states that the Ministry of Energy has always acted to protect commercial interests of Sui companies and facilitated approvals of policy guidelines related to the UFG from Economic Coordination Committee (ECC), which are against the Ogra Ordinance in the context of efficiency.

The report pointed out the UFG is 13 percent (of the total supply) for Sui gas companies, which occurs for two reasons: incorrect or no measurement of gas and lack of commitment (acted out through the stakeholders (Sui and E&P companies) to accurately and fully reconcile system gas inputs and outputs.

It is a simple accounting of what goes into and comes out of the system, the report says.

It states, while internationally gas pipeline operators are allowed a UFG rate rider in the range of 0.5 percent to less than five percent, in Pakistan the UFG is present in the entire gas supply chain at much higher level, which are partially allowed legally and partially covered through deliberately confusing metering and unit conversion formula.

It further says that the federal government's support has been available to Sui companies/ Ministry of Energy in the form of gas (theft and recovery) Act 2016, and arrangement of $190 million World Bank assistance in 2013 for curbing the UFG.

However, Sui companies did not show an interest and the World Bank cancelled the project in 2016.

Unfortunately, Ministry of Energy lacks the capacity to even understand the technicalities involved in the UFG issue. This is despite the fact, that senior government officials are nominated to the boards of Sui companies/UFG committees of the boards.