SNGPL, SSGC stock prices have sunk ‘due to speculation’

Published: December 13, 2017
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Gas and diesel pumps along with gas prices are shown at a gas station. PHOTO: REUTERS

Gas and diesel pumps along with gas prices are shown at a gas station. PHOTO: REUTERS

ISLAMABAD: The Oil and Gas Regulatory Authority (Ogra) on Tuesday categorically dismissed the perception that a revised tariff regime proposed for natural gas supplies had brought down stock prices of public gas utilities, saying the investor reaction was based on sheer speculation.

Speaking at a press briefing on Tuesday, Ogra Chairperson Uzma Adil Khan revealed that the regulatory authority had received feedback that some quarters were manipulating the proposed gas tariff mechanism for vested interests.

She was of the view that stock prices of Sui Northern Gas Pipelines (SNGPL) and Sui Southern Gas Company (SSGC) were on the wane because of the prevailing economic situation and they had nothing to do with the proposed tariff regime and draft Third Party Access Rules 2017.

Corporate corner: OGRA to decide about new tariff regime

She pointed out that the share price of Pakistan State Oil was also falling, but it had no link with the gas sector reforms.

Responding to allegations of favouring the gas utilities by fixing 17-17.5% rate of return at the expense of consumers, Khan clarified that Ogra set the return based on the premise that the two companies were meeting the efficiency benchmark.

“It was a past practice according to demand of the situation. Now, the scenario has changed after liquefied natural gas (LNG) imports and a market-based tariff will be set,” she remarked.

She said the gas utilities, which were earlier running on the fixed rate of return, were opposing the proposed tariff regime, fearing their profitability would take a hit and their stock values would go down.

Dispelling the fears, she emphasised that the utilities were assets of the government and the regulator wanted their sustainability.

She said the government had assured the companies that they would not be worst off in the new tariff regime and the regulator proposed the revised market-based tariff in line with the prevailing situation.

The regulator would also give licences to companies capable of marketing gas under the third-party access rules, she said.

At a consultative session, a World Bank consultant gave presentation on the third-party access rules and the network code whereas the Ogra executive director (finance) spoke about the tariff regime.

At the end of the presentations, the stakeholders raised a number of queries which were noted.

Govt assures SNGPL its return will not go down under reforms

Speaking on the occasion, the Ogra chairperson explained that consultative sessions had been held in all provincial capitals and the feedback from stakeholders would be examined.

Their valid arguments would be incorporated into the final report, which would be unveiled in consultation with the federal government, she announced.

“We will frame market-based rules that will address not only concerns of various sectors, but the end-consumers too,” she said.

Citing the previous consultative sessions, Khan said each sector wanted to avoid the burden following the framing of third-party access rules, which was unjustified. “Each sector has to share the burden as per government’s policy,” she remarked.

An SNGPL officer recommended that like the previous Third Party Access Rules 2012 where powers of capacity allocation were with Ogra, the same system should continue to remain in place.

Giving his proposals, All Pakistan CNG Association Central Chairman Ghiyas Abdullah Paracha suggested that the private sector should be facilitated in fuel imports.

He said the compressed natural gas (CNG) industry had set up a special purpose vehicle with government’s support for gas supply to the CNG retail outlets, but the utilities were maintaining a monopoly and did not allow them to make LNG imports.

Earlier, the government had suspended third-party access rules to keep the private sector away from LNG imports, but as the PML-N administration is reaching the end of its tenure, it has now started consultations to give the private sector access to imported gas.

Published in The Express Tribune, December 13th, 2017.

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Reader Comments (1)

  • Sodomite
    Dec 13, 2017 - 10:51AM

    Stock prices are tanking because the two Gas Suppliers are bankrupt and the GOP is pulling the plug on the fixed rate of return that they were operating under. If efficiency targets have been met then why are SNGPL\SSGTC unhappy in going to market return?? No one wants to hold stock of a company that cannot assure and project profitability into the future.OGRA Chairman needs to read Business Finance and Basic Accounting again.Recommend

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