ISLAMABAD: Gas sector-related issues have been worsening over the years which include inter alia gas shortage due to ever-widening demand and supply gap, unabated UFG losses especially of Sui Southern Gas Company (SSGC) hovering around 17 percentage and under-utilized LNG infrastructure ranging from 250-300 MMCFD every year.

This was revealed in the audit report on the Accounts of Petroleum Division and Oil and Gas Regulatory Authority (OGRA) audit year 2022-23.

The audit report observes that gas shortage could have been mitigated by utilising this idle capacity enabling the import of LNG (up to 1200 MMCFD) but LNG procuring agencies i.e., Pakistan State Oil (PSO)/Pakistan LNG Limited (PLL) failed to arrange imports there-for and no long-term contract either government-to-government (G2G) or commercial basis were executed and seemed unviable in near future due to high RLNG prices.

To cope with the demand-supply issues, addressing the duality of legal regimes for indigenous gas and RLNG, especially for pricing purposes was necessary and legislation relating to amendments in OGRA Ordinance, 2002 had been made in January/February 2022 but the same could not be implemented yet.

Resultantly, the RLNG pricing could not be brought under the OGRA Ordinance, 2002 and WACOG for blended gas i.e. indigenous and RLNG was yet to be formulated.

Due to a weak contractual framework, disputes between the two gas companies remained unresolved such as recovery of cost of RLNG withheld by SSGC (Rs47 billion) prior to June 2020, the SSGC was claiming high UFG losses due to handling of RLNG volumes in its pipeline and Third Party Audit of UFG losses could not be finalised by OGRA.

Moreover, the ECC issued guidelines for RLNG pricing and its components in May 2018 but OGRA could not determine the final RLNG prices since the inception of RLNG regime. In November 2021, the OGRA tasked SNGPL to ascertain RLNG price components which could not be done despite lapse of more than one year.

The federal government took multiple initiatives to mitigate gas shortage in winter and issued instructions to SNGPL for diversion of RLNG (which was initially meant for power / industrial sectors) to domestic sector on domestic tariff in winter months. The SNGPL claimed the difference of RLNG price and domestic tariff of indigenous gas amounting to Rs176.362 billion (129,106,823 MMBTU) from the federal government for the financial years, 2018-19 to 2021-22.

However, the SNGPL did not arrange any measurement and billing mechanism for such diversion to domestic consumers.

The federal government released funds of Rs67 billion and payment was made to SNGPL during the fiscal years, 2021-22 and 2022-23 without validating the claims of SNGPL with regard to measurement of actual RLNG diverted.

The SNGPL’s claims for balance amount (Rs110 billion) were still pending with the federal government despite diversion of RLNG in huge quantity to domestic sector, gas shortage could not be substantially mitigated because winter load management and curtailment schedules announced by federal government were not implemented in letter and spirit because gas supply to industry/CNG sectors were continued in violation of instructions issued by federal government.

Some other related issues also remained unresolved such as non-adjustment of indigenous gas to RLNG consumers on account of energy equivalence (Rs68 billion) and diversion of RLNG to domestic consumers in summer months (Rs30 billion).

In order to boost exports and foreign exchange reserves, the federal government introduced regionally competitive energy tariffs and issued directions to SNGPL for the supply of RLNG to Export Oriented Units on concessionary rates (at US$6.5 per MMBTU) from October 2018 onwards.

The SNGPL claimed/received an amount of Rs105 billion on account of RLNG subsidy above US$ 6.5/MMBTU from the federal government for the fiscal years 2018-19 to 2021-22. This scheme was flawed owing to the absence of any monitoring mechanism to keep watch over exports/remittance by EOUs benefiting from the scheme.

Copyright Business Recorder, 2023