The Oil and Gas Regulatory Authority (OGRA) will start stakeholders' engagement sessions from November 21 to December 5, 2017 to revisit the regulated Third Party Access (TPA) Rules 2012 and tariff regime of natural gas. The gas sector reforms have been initiated in collaboration with the World Bank. It has been envisaged that in the new structure of the competitive gas market in the country, a new set of TPA rules is required which will be applied to the all essential infrastructure facilities.
The OGRA is also in the process of reviewing the existing tariff regime for the natural gas sector in view of the prevalent integrated companies, proposed unbundled structure, and changing business dynamics in the local market as well as international best practice.
All relevant stakeholders including gas utility companies, LNG developers, licensees and general public are asked to furnish their comments. The engagement session will be held in Peshawar, Islamabad, Lahore, Karachi and Quetta. The government is mulling achieving a competitive and market-oriented sector, whereby a customer in any part of the network can be served gas while ensuring security of supply and improving financial sustainability for the sector and providing a framework for facilitating constitutional provisions regarding the allocation of domestic gas resources.
An analytical work to design a reform program of the downstream gas sector with support from the World Bank was initiated in November 2015. This yielded a reform programme with the following pillars: a two-tier market which distinguishes users of imported gas from those of domestic gas; tier 1 will comprise domestic gas delivered on an interruptible (as and when available) basis at regulated prices set by the government, as has been the practice to date. Tier 2 will comprise imported gas (RLNG at this point) delivered on a firm basis at market prices with all costs of delivering RLNG ring-fenced. This regime will ensure implementation of a key concern expressed by the provinces that all costs of delivering RLNG must be borne by RLNG customers without placing any related burden on non-RLNG consumers.
A new tariff methodology is being devised by the OGRA to ensure proper allocation of costs under this two-tier market. In due course, this tariff methodology will be circulated for consultation with all key stakeholders, particularly the provincial governments, under OGRA's consultative process.
The TPA introduction to the transmission network where a buyer of gas can contract with a supplier may use the transmission system to move that gas against a transmission charge. With the introduction of TPA on the network, the Sui companies will not be taking title to gas being transported on the network. They will simply transport gas from the entry point and deliver at the exit point requested by third parties. This will allow every consumer of Tier 2 gas to choose the supplier of Tier 2 gas and promote transparency of cost allocation as well as competition among importers bringing RLNG to Pakistan without present benefits. This will be achieved without placing burden on Tier 1 customers since they will be served Tier 1 gas by their respective distribution companies as has been the practice to date.
Unbundling of SNGPL and SSGC into a single national transmission company and four provincially defined distribution companies: This pattern is intended to facilitate the allocation of gas produced in a province to be delivered to the customers located in that same province. Each distribution company will have an exclusive right to serve Tier 1 customers in their service territory, as has been the practice to date.
The implementation of reforms is now to be initiated through a policy statement by the government, which lays out how the reformed sector is to operate. This policy statement was presented to the Gas Sector Leadership Committee at Inter-Provincial Coordination Committee (IPCC) meeting held on October 9, 2017. The Gas Sector Leadership Committee agreed in principle with the policy statement. However, the provincial government had reservations on the issues or representations on the boards and interpretation of relevant constitutional provisions.
In previous Gas Sector Leadership Committee meeting, the Prime Minister had decided to meet the chief ministers to sort out the outstanding issues in this regard. The representatives of Sindh and Khyber Pakhtunkhwa, once again, expressed their reservations on the pending issues of interpretation of relevant constitutional provisions which was an important prerequisite for formulation and implementation of reforms. Minister of State for Petroleum Jam Kamal, therefore, suggested that before formal introduction of Gas Sector Reforms, the technical teams of provinces should hold meetings with technical personnel of the Petroleum Division to make the meetings of Prime Minister with the chief ministers more meaningful.
In IPCC meeting, the chief secretary Khyber Pakhtunkhwa and representative of government of Sindh demanded access to real time data on oil and gas for proper analysis before the meetings of technical committee. The chief secretary further stated that the current federal policies on oil and gas were undermining indigenous exploration of oil and gas.
It has been reported when a proposal for the unbundling of the Sui companies was referred for approval of the ECC in 2013, the ECC had directed that the matter be taken to the CCI after due consultation with the provinces. This consultation has since taken place through the forum of the Gas Sector Leadership Committee.