OGRA raises RLNG price for gas utilities

Rate hike will further fuel inflation in country

KARACHI:

The government has notified an increase in the price of re-gasified liquefied natural gas (RLNG) by up to 16.5% for Sui Northern Gas Pipelines Limited (SNGPL) and Sui Southern Gas Company (SSGC) for September 2021, signaling a further increase in inflation in the country.

The Oil and Gas Regulatory Authority (Ogra) on Friday notified a price increase of 16.2% (or $2.14) to $15.35 per million British thermal units (mmbtu) for SNGPL for the previous month of September compared to $13.21 per mmbtu for August.

The regulator increased the gas price for SSGC by 16.53% (or $2.14) to $15.09 per mmbtu compared to $12.95 per mmbtu in August.

The notified prices include 6.3% gas leakages (unaccounted for gas - UFG) during transmission and distribution at import terminals and onwards to SSGC and SNGPL. The prices exclude the general sales tax applicable to utility companies, according to the notification.

Pakistan imported a total of 11 LaNG cargoes, or 34,875,970 mmbtu, at a cost of $504.47 million in September. The leakages reduced the quantity of gas available for sale to 32,802,496 mmbtu.

The two gas utilities supply a big chunk of imported gas to power companies. Besides, they also supply a limited quantity of gas to fertiliser manufacturers, CNG filling stations, textile sector and households.

The RLNG price for some of the fertiliser manufacturers and textile exporters will remain unchanged because gas is provided to them at a fixed price.

“The government has announced the increase in RLNG price in the wake of a surge in the cost of imported gas,” Arif Habib Limited Head of Research Tahir Abbas said while talking to The Express Tribune.

“The increase came mainly due to a spike in LNG price in global spot markets. The price of gas imported under long-term contracts with Qatar and other suppliers has remained significantly low,” Pak-Kuwait Investment Company Head of Research Samiullah Tariq added.

“Rupee depreciation has also contributed to the hike in the cost of imported LNG,” he said.

To recall, Pakistan imported two cargoes at the historic high price of $20 per mmbtu from the spot market in September. The price of gas under long-term contracts, however, stood at around $10 per mmbtu (or on an average 12.5% of the prevailing Brent price) in the month.

During the month, around 60-65% of LNG was imported through long-term contracts and the rest from the spot market.

“The increase in the weighted average distribution price of imported gas will push up the cost of fuel component in power production,” Abbas said.

Later, the rise in the price of gas and RLNG component in power production may spark a jump in inflation reading as the impact of increase in gas and power prices on the economy is witnessed after a lag, he said.

Published in The Express Tribune, October 2^nd, 2021.

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