SNGPL succeeds in cutting line losses to 8.07%, saves billions

Loss level still significantly higher than the 4.5% benchmark

KARACHI: Sui Northern Gas Pipelines Limited (SNGPL) has been able to slash its line losses by 1.14 percentage points to 8.07% in fiscal year ended June 30, 2017, but the level is still far higher than the 4.5% benchmark.

The reduction in the losses - better known as Unaccounted for Gas (UFG) caused by theft and leakage - has helped the public gas utility save billions of rupees.

“In the year under review (FY17), the volumetric loss has dropped from 46.7 bcf (billion cubic feet) in 2015-16 to 39.5 bcf. Accordingly, the UFG ‘disallowance’ has come down from Rs7.52 billion in 2015-16 to Rs5.45 billion in the current year (FY17),” SNGPL Chairman Muhammad Saeed Mehdi said in the company’s annual report for 2017.



UFG losses in fiscal year 2012-13 had been recorded at 11.17%, he said.

The Oil and Gas Regulatory Authority (Ogra) - the oil and gas industry regulator - has allowed the public utility to recover maximum 4.5% of UFG losses from the consumers. For anything above this limit, the company pays Rs1.5 billion for each percentage point to the regulator as penalty for failure to tackle the problem, it has been learnt.

The penalty is other than the losses the company books due to UFG of billions of rupees. Insight Securities calculated recently that a percentage point of UFG loss was worth Rs4 billion.

The fall in UFG losses was one of the leading factors that helped SNGPL achieve a record high after-tax profit of Rs8.61 billion (earnings per share Rs13.58) in FY17, which was 69 times higher than the profit of Rs124 million (earnings per share Rs0.20) in the prior year.

“The company operates under the guaranteed 17.5% rate of return covenant. After all adjustments made by Ogra, an effective return of 12.83% was achieved in FY17 against 2.79% in the previous year,” Mehdi said.

SNGPL, however, is facing liquidity challenges mainly due to the accumulation of differential margin of Rs66 billion which is recoverable from the government of Pakistan.

“The settlement of this amount depends on increase in gas prices duly notified by Ogra with consent of the government of Pakistan,” he said.

SNGPL’s stock price inched down 0.13% or Rs0.15 to Rs119.48 with volumes of 2.49 million shares at the Pakistan Stock Exchange (PSX) on Monday.

Delay in Karachi-Lahore pipeline-II

SNGPL’s second pipeline project from Karachi to Lahore for the transportation of 1,200 million cubic feet of imported liquefied natural gas per day (mmcfd) has been delayed by five months.



Apparently, the delay is the outcome of the company’s preoccupation with the ongoing project for stepping up gas supplies from the first Karachi-Lahore pipeline to 1,500 mmcfd from 1,200 mmcfd.

Mehdi voiced hope that the second pipeline between the two mega cities would be completed by March 2019.

Earlier, the gas utility forecast that the project would be ready by October 2018, according to an announcement made at the PSX in March 2017.

“Company’s system augmentation project (one) from Sawan to Lahore is complete to transport 1,200 mmcfd of RLNG downstream Sawan. However, construction work on the balance 150km pipeline is in progress and after its completion by the end of this year, the system’s capacity will rise from 1.2 bcfd to 1.5 bcfd,” he said.

Published in The Express Tribune, November 7^th, 2017.

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