The Economic Coordination Committee (ECC) of the cabinet, which is scheduled to meet today (Tuesday), is going to take up the proposal for revising oil prices on a fortnightly basis from the current monthly basis in the wake of a continuous rise in the international crude market.
The committee is also expected to give the go-ahead to the revision in wellhead gas pricing formula, which will pave the way for injection of 200 million cubic feet per day (mmcfd) of liquefied petroleum gas (LPG) air mix into the system.
The petroleum ministry has proposed to the ECC to restore the fortnightly oil pricing mechanism to shield refineries from losses caused by frequent fluctuating global crude oil prices.
Earlier, Attock Refinery Limited (ARL) had proposed to the government to restore the fortnightly oil pricing mechanism.
“Owing to different pricing periods for crude oil and products of refineries, uniformity needs to be established by restoring the fortnightly pricing mechanism instead of the current monthly revision to save the refineries from adverse impact due to this anomaly,” ARL said in a proposal to the petroleum ministry.
ARL Chief Executive Officer (CEO) Adil Khattak told The Express Tribune that the government set oil prices on a monthly basis but frequent changes in international crude prices eroded the margin of oil refineries. “Therefore, we proposed to the government to restore the fortnightly oil pricing mechanism,” he said.
Gas prices
The petroleum ministry has also proposed a revision in the gas pricing formula. “If the revised gas pricing formula is approved, gas prices will go up by over 29 per cent,” a government official said.
According to the proposed guidelines of the ministry, the Oil and Gas Regulatory Authority (Ogra) will be allowed to include the cost of LPG air mix (gas mixed with air) in the uniform cost of gas in order to compute the weighted average cost.
The ministry has worked out a comprehensive plan that shows an increase in wellhead gas prices after injection of LPG air mix into the system.
The weighted average cost of gas is expected to increase from Rs308.93 per million British thermal units (mmbtu) to Rs313.79 per mmbtu, an increase of 1.57 per cent if 10 mmcfd of LPG air mix is added.
The weighted average cost will rise by 7.73 per cent to Rs332.66 per mmbtu in case of addition of 50 mmcfd of LPG air mix and move higher by 15.21 per cent to Rs356.94 per mmbtu if 100 mmcfd is added to the system. The cost will go up by 29.49 per cent to Rs400.05 per mmbtu in case 200 mmcfd of LPG air mix is injected. The ECC had approved policy guidelines on December 26, 2007 relating to LPG air mix, compressed natural gas (CNG) and liquefied natural gas (LNG) distribution projects undertaken by Sui Northern Gas Pipelines Limited (SNGPL) and Sui Southern Gas Company (SSGC), which were issued by Ogra.
Under these guidelines, gas prices for LPG air mix and natural gas were different. However, under the new proposed guidelines, SNGPL and SSGC will be able to charge a rate of return equal to the 17.5% rate of return for their gas operations.
Currently, SSGC is supplying LPG air mix to Gwadar (Balochistan), Noshki (Balochistan) and Kot Ghulam Muhammad (Sindh).
Published in The Express Tribune, March 13th, 2012.
COMMENTS (4)
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@Meekal Ahmed First of all I wasn't talking about Obama or the US or the drone strikes...or was I? And dude how many poeple drive SUV's around here...so wasn't talking about SUV's either. What I was referring to was that how it effects a life of a common man when there is an increase in the price of diesel. I am no economist but I expect an economist would devise a strategy that will not burden a common man and still make fiscal deficit in control. Let it be clear that I don't expect govt to subsidize petroleum products but I do expect them to not screw us over it.
@FK:
You need to understand one very simple economic fact: if oil is being imported at for example $100/bbl and is being sold to you and me, the fat-cats with our gas-guzzling SUV's at $80/bbl. do you think the difference goes up in smoke? Just disappears?
SOMEONE has to pay for it!
Oil prices are "exogenous" for policy-makers. They have NO control over it.
You say, well, cut the taxes and give us "relief".
have you noticed we are always calling for 'relief"?
Brilliant.
But then a cut in taxes means less revenue and guess what? It increases the fiscal deficit and since we can only borrow to cover the gap, it causes more inflation. If you are happy with that the government would be happy for you to say so.
Oil prices rising by 10% in the US are causing Obama's rating polls to fall by 1%!
Ok, fine, you don't like Obama because he keeps killing those murderous thugs in Waziristan. So, how would you be voting, if you could, come November?
The GOP?
it was in BB's time that a flexible pricing mechanism was first put in place. that was pretty brave of her given her wobbly government. When her Advisor on finance said he had sent her a Summary on increasing oil prices, she said "Jafarey Sahib, I have agreed to a mechanism so please follow it and don't bother me".
Brave and bold lady.
But "they" took care of her, right?
So, relax, take a chill-pill and read up on Economics 101. We have no option but to pass it on as the world does unless we want to be burdened with subsidies that the fiscal accounts cannot afford or sustain.
If you mean that the benefits of a REDUCTION in oil prices should also be passed on to you, then I agree with you.
Don't blame the Government. It's the people who elect them to their offices every election. We totally deserve this....
Hey instead of fortnightly why not make it weekly or maybe daily??? You incompetent people /Government can only do this, squeeze the poor awam of Pakistan and lead them to suicide!