Gas firms win praise for lower loss

State-owned Sui Northern Gas Pipelines Limited (SNGPL) and Sui Southern Gas Company (SSGC) have earned praise of the government for notably controlling losses during gas transmission and distribution to end-consumers between 2018 and 2021.

Fact checks suggest that the losses partly went down due to low production of gas by the domestic fields. The low output resulted in reduced transmission and distribution of gas to the end-consumers. Accordingly, the line losses, leakages and theft dropped as well, The Express Tribune learnt.

Moreover, the data of reduction in gas losses - technically known as Unaccounted for Gas (UFG) - was for the previous fiscal year ended June 30, 2021.

“UFG losses of SNGPL’s official system have decreased from 11.8% in 2018 to 8.9% as of now (till October 2021),” Minister of Energy Hammad Azhar stated in a tweet on Wednesday.

“This represents a volumetric reduction in gas losses from 52 billion cubic feet (bcf) to 34 bcf per annum. Good performance by team SNGPL.”

The next day, Thursday, SNGPL clarified through a statement sent to the Pakistan Stock Exchange (PSX) that “this is with reference to the tweet of Minister of Energy Hammad Azhar that Unaccounted for Gas of the company for the year ended June 30, 2021 (instead of October 2021) is expected to be approximately 8.9%.”

“This number is, however, subject to the ongoing external audit and subsequent determination by the regulator.”

The minister’s tweet gave the impression to the market that UFG losses during July to October 2021 had reduced to 6.8%, which official sources did not confirm, a market expert said.

“The speculation (regarding a further reduction in UFG during Jul-Oct 2021) motivated equity investors at the PSX to buy SNGPL shares, as the reduction in UFG losses meant an increase in the company’s revenue. However, the clarification calmed them down,” he added.

Earlier, the Oil and Gas Regulatory Authority (Ogra) allowed SNGPL and SSGC to recover up to 6.3% in UFG losses from the consumers. This means that the gas utilities will take a hit on their revenue from the UFG losses above 6.3%.

“They lose revenue worth Rs1.5-2 billion against every percentage point of UFG loss.”

He said that the production of gas by the domestic fields had gradually gone down to around 3.24 billion cubic feet per day (bcfd) compared to around 4 bcfd a couple of years ago.

“The low gas production and transmission was a partial reason behind the reduction in UFG losses,” he said.

The reduction in UFG losses should benefit the end-consumers through stability in gas tariffs or less increase in tariffs in future.

A brief report on UFG losses prepared by the Ministry of Energy (Petroleum Division) said that SNGPL cut UFG losses by 14.02 bcf to 8.83% during the previous fiscal year ended June 30, 2021 against the given target of 5.7 bcf.

Similarly, SSGC cut UFG losses by 13.09 bcf to 15.1% in the year against the given target of 10.46 bcf.

“It is evident that SSGC reduced UFG losses by 2,625 million cubic feet (mmcf) above the targeted reduction of 10,462 mmcf,” the report read. “Similarly, SNGPL slashed UFG losses by 8,319 mmcf against the targeted reduction of 5,700 mmcf.”

The report claimed that the gas utilities reduced UFG losses through the rehabilitation of over 1,000 km of old pipeline network, leakage surveys, repairs of lines stretching over thousands of kilometres and replacement of thousands of defective meters.

In addition, the detection of theft by domestic consumers, commercial consumers and non-consumers also aided in reducing the UFG losses.

Besides, the gas utility companies reduced the losses through conducting detailed surveys of industrial consumers and industrial meters, according to the report.

Published in The Express Tribune, November 14^th, 2021.

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