As the Ministry of Finance gives a green light, the Economic Coordination Committee (ECC), scheduled to meet Thursday (today), is likely to approve the revised gas pricing formula for Mari Gas Company.
Official sources told The Express Tribune that the finance ministry had issued a no-objection certificate (NOC) in writing to revise the gas pricing formula for the company.
In Mari Gas, the government has a 20% stake, Oil and Gas Development Company holds 20%, Fauji Foundation has 40% and the general public holds 20% stake.
At present, Mari Gas is running on the cost-plus formula that allows it to charge a gas price of $0.73 per million British thermal units (mmbtu). Its management is pushing the government to scrap the price formula, arguing that it does not have enough money to pour into exploration activities.
Under this formula, the expenditure limit for the company is $40 million per year, which is in sharp contrast to the company’s claims that it annually needs $120 million for exploration work.
Now, according to sources, the government has agreed to offer $2.15 per mmbtu to Mari Gas under the Petroleum Policy of 2001 by doing away with the cost-plus formula. This price would be raised gradually.
The economic decision-making body is also likely to raise the margins for oil marketing companies (OMCs) and petroleum product dealers.
Earlier, it had refrained from taking the decision in the wake of the finance ministry’s suggestion that the margins should be kept unchanged by the time petroleum product prices started falling. Now, the international oil prices have seen a sharp decline which will also affect domestic prices and therefore, the ECC may approve the raise in the coming meeting.
The oil and gas regulatory authority (Ogra) has endorsed the proposal for the increase in margins.
The petroleum ministry had proposed a rise of Rs0.16 per litre for High Speed Diesel (HSD) margins, but the OMCs did not agree. “Now, a higher margin of Rs0.19 has been proposed for the approval of the ECC,” an official said.
For dealers, an increase of Rs0.40 per litre in margins has been recommended.
The revision in margins is being calculated while keeping in view the changes in Consumer Price Index (CPI) since the last date of revision in November 2012, in order to give an appropriate return on investment.
The ECC is also likely to approve policy guidelines on determining revenue requirements for gas distribution companies in an attempt to pass the burden of Rs49 billion on to consumers.
This amount has been stuck with two major distribution companies – Sui Northern Gas Pipelines Limited (SNGPL) and Sui Southern Gas Company (SSGC) – since the day they obtained stay orders from the courts following a reversal of the increase in unaccounted-for-gas (UFG) ceiling from 5% to 7%.
Ogra, headed by Tauqir Sadiq at the time, had raised the UFG ceiling – covering gas theft and leakage – for 2009-10. However, after one month, it rescinded the decision and set the ceiling again at 5%.
The petroleum ministry proposes that it should be provisionally allowed to consider the following as gas sales volumes for the purpose of calculating UFG benchmark, which includes volumes pilfered by unregistered consumers but detected and determined by the companies, volumes against minimum billing amount charged to domestic consumers, volumes consumed in law and order-stricken areas and the impact of change in bulk-retail ratio for UFG using 2003-04 as the base year when UFG ceiling stood at 6.5%.
Published in The Express Tribune, October 30th, 2014.
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Just milk the general public in any name .
Cost plus formula is not satisfactory.. More milk is need , hence exploratory cost is mentioned
Greed has no limits