LNG diversion leads to gas price hike

HR cost constitutes only 4% of total gas price, says SNGPL

Our Correspondent March 29, 2024
The circular debt in RLNG chain has been on the rise because of prolonged delay in application of the weighted average cost of gas. PHOTO: FILE


Sui Northern Gas Pipelines Limited (SNGPL) has emphasised that the cost of human resources accounts for only 4% of the total gas price, where 94% is the cost of gas and the remaining is the return on capital expenditure.

According to an SNGPL spokesperson, one of the key reasons behind the increase in gas prices is the continuous depletion of domestic gas resources, which has necessitated the diversion of re-gasified liquefied natural gas (RLNG) to domestic consumers, particularly during winter. The average cost of RLNG is about Rs3,500 per million British thermal units (mmBtu) while the average sale price for the domestic sector is around Rs1,100 per mmBtu.

This differential amounting to Rs231 billion has also necessitated the current price increase since the cost of RLNG diversion has to be recovered to keep the LNG supply chain functional, the spokesperson said.

The official added that the cost of indigenous gas had gone up by Rs69 billion as the Pakistani rupee devalued by 55% over the past two years and all gas purchase contracts were in US dollars as well as linked with crude and furnace oil prices. It must be pointed out that despite the recent increase in gas prices, the average rate for the protected class of domestic consumers is Rs513 per mmBtu, much lower than the cost price of Rs1,674.

Some 4.4 million consumers fall in the protected category in the SNGPL network, which constitute 60% of the total consumers. Their bills during the winter month of February remained less than Rs2,000 (inclusive of taxes).

Despite the tariff increase, a subsidy of Rs128 billion is projected to be provided to the domestic consumers of SNGPL during FY24, the spokesperson said. He highlighted that the gas business was highly regulated and governed under the Ogra Ordinance, 2002. To determine the revenue requirement of gas companies, Ogra has been holding public hearings since 2002.

Published in The Express Tribune, March 29th, 2024.

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