The federal government has reportedly decided to spend over Rs 9 billion for gas supply to curb gas theft in KP's gas producing districts, almost to be equally shared by SNGPL and the provincial government, sources close to Prime Minister's Special Assistant on Energy told Business Recorder.
Giving the background, the sources said, the ECC, in its meeting held August 8, 2019 while considering a summary titled "extension of gas network/rehabilitation of network in oil and gas producing districts of KP" directed the Petroleum Division to resubmit the case after consultation with the Ministry of Planning and Finance Division.
The Petroleum Division's summary of August 7, 2019 had the following proposal "foregoing in view M/s SNGPL will bear a cost of Rs 4.668 billion whereas the provincial government has already released 694.518 million (first tranche) out of Rs 4.372 billion is for undertaking the project. Accordingly, the Petroleum Division proposes that the project may be approved enabling SNGPL to undertake the schemes after seeking approval from Ogra for investing its share of funds in the project."
Meanwhile, the views/comments of Planning and Finance Divisions at the proposal of the summary have been received. The Planning Division has conveyed that the scheme should be first processed through the Development Working Party (DWP) before its submission to competent forum. However, both the Divisions have referred to a decision of the ECNEC of November 5, 2004 with respect to "procedure approval of self-financing development schemes of autonomous organizations (commercial/ non-commercial)." Planning Division's summary states that autonomous organizations whether commercial or non-commercial having board by whatever name called, should be competent to sanction their development schemes with 100 percent self-financing with no government guarantee and involving less than 25 percent foreign exchange/foreign assistance, subject to following: (i) a DWP should be constituted by each organization and notified to consider and approve their self-financed projects; (ii) DWP should be headed by the Chairman/ head of organization and among others should include representatives of Planning and Development Division, Finance Division and the concerned Ministry/ Division each should not be below the rank of Joint Secretary; and (iii) the decision of the DWP will be subject to endorsement of the board of the organization.
Gas companies are undertaking gas schemes based on the guidelines issued to them from time to time. A criteria was developed with the approval of Cabinet Committee on Energy (CCoE) on April 7, 1992 which was further elaborated under the guidelines issued with the approval of the then Prime Minister. Subsequently, the ECC in its decision of July 15, 2008 revised the cost criteria for undertaking of gas schemes by the gas companies.
Pursuant to cost criteria approved by the ECC, the feasibility of any gas scheme is measured taking into account the cost with approved criteria and cost above the approved criteria. The cost within criteria is borne by the gas company whereas cost above is funded either by the federal government or by the provincial government.
The cost within criteria incurred by gas companies normally forms part of their annual revenue requirement which is determined and approved by the Oil and Gas Regulatory Authority(Ogra) whereas as per the guidelines, the gas companies are not entitled to earn return on assets developed funds out of the funds/ grants provided to them by the government.
The gas losses in the oil and gas producing districts of KP are more than 10,000 MMCF per annum which are equivalent to about Rs 3.4 billion per annum. The gas company is not only losing gas volumes but is also deprived of its revenue to be earned on the sales of gas in the producing districts of KP. Accordingly, in order to eliminate the gas losses due to leakage/rupture and theft, M/s SNGPL has prepared a phase-wise programme/ project to replace the illegal pipeline network with a standard one. This will comprise of laying of main supply line and distribution network and to rehabilitate the damaged pipeline network of SNGPL laid in 2008-09 in the periphery of all 13 Sales Meters Stations (SMSs) of gas producing districts of KP where illegal usage of gas is prevalent and continuously on the rise. The project will provide 72,039 legal connections to the residents with estimated gas supply of 27 MMCFD.
The total project cost has been worked out at Rs 9.4 billion against which M/s SNGPL is to bear a cost of Rs 4.668 billion and balance Rs 4.372 billion has been committed by the KP government.
However, in order to make the project feasible for M/s SNGPL to invest its share(cost within criteria) forming part of revenue requirement, Petroleum Division has sought approval of the ECC for the following: (i) execution of the project and investment of M/s SNGPL's share in the project after seeking necessary regulatory approval from OGRA; and (ii) KP government would be requested to provide full assistance to M/s SNGPL for curbing the menace of gas theft with the assurance to eliminate the recurrence of gas theft in the gas producing areas.