ISLAMABAD: The Sui Northern Gas Pipeline Limited (SNGPL) has asked the Petroleum Division that the policy of allowing third parties to sell indigenous gas in RLNG areas needs to be reviewed and all available and upcoming indigenous gas needs to be provided to gas utilities to increase indigenous gas blend for provision of gas to public at large at affordable tariffs.

In a letter to Petroleum Division, the SNGPL states “the existing policy of allowing third parties to sell indigenous gas at cheaper tariff in RLNG area like Punjab has created market distortions.” While the SNGPL can only sell as Ogra notified rate at RLNG tariff, the private parties can bring system gas in RLNG area and sell at lower rates making windfall gains.

Industrial consumers are shifting to cheaper indigenous gas while RLNG surplus continues to increase.

Prioritising imported RLNG to domestic gas harms energy sector

Under the IMF scheme of things, which will be disastrous for the petroleum sector, CPPs are to be shifted from gas utilities to Power National Grid.

In reality, these CPPs are shifting to third party shippers since major chunk of them are not going to opt for power sector, owing to very high tariffs, lack of reliable supplies etc, while the decision of government to shift CPP’s to power grid can potentially render SNGPL, PSO etc bankrupt and can possibly lead to sovereign default. The third parties will be hugely benefiting from this decision since they are not being asked to stop supply to CPPs. Hence the essence of IMF conditions will be compromised and these third parties will make windfall profits owing to market imperfections and regulatory failure at the cost of public at large.

A shipper is already supplying gas to CPPs in Punjab, it states.

Level playing field to be ensured and regulatory imperfections be removed vis-à-vis private third parties allowing SUIs to compete on equal terms.

Oil sector is a classic example where PSO is competing with the private OMCs but the pricing structure is same for all entities and there are no in built subsidies.

Any subsidies should be paid through the budget; otherwise, the SOEs will be shut down because of preferential treatment being given to third party shippers which is against spirit of promoting competition.

The letter states that departure of CPPs from gas grid would reduce SNGPL’s sale, impacting its revenue and leaving around 157 mmcfd of surplus RLNG with no potential buyer. 40 mmcfd approximately of RLNG will be rendered surplus by SSGC. Total RLNG surplus arising from sudden shifting of captive will be around 200 mmcfd in addition to 150 mmcfd surplus due to reduced power offtake making a total surplus of around 350 mmcfd. This will increase to 400 mmcfd as KE’s RLNG demand from PLL is expected to phase out from 2026. This can potentially result in around 240 surplus cargoes over the term of the remaining contract. Over 30 percent of RLNG supply will be rendered surplus.

In such instance, the SNGPL will be constrained to divert RLNG to domestic consumers to the extent to their demand thus increasing the RLNG diversion volumes. Since domestic demand is limited, the SNGPL will be constrained to curtail supplies from indigenous gas fields or surplus LNG cargoes may have to be diverted on hefty take of pay penalties or sold on net proceed differential.

Copyright Business Recorder, 2025