The Oil and Gas Regulatory Authority (Ogra) has slashed gas prices up to 10% for the public utilities effective from financial year 2024-25, which will begin in July.
The regulator reduced the tariff while determining the revenue requirement of Sui gas companies for FY25.
It recommended an average prescribed price of Rs1,635.90 per million British thermal units (mmBtu) for Sui Northern Gas Pipelines Limited (SNGPL), which reflected a decrease of Rs179.17 per mmBtu, or 10%.
Ogra calculated the financial impact of previous years’ revenue shortfall at Rs580,585 million compared to the SNGPL’s claim of Rs862,612 million. It was referred to the federal government for an appropriate policy decision and was not included in the initial determination.
The regulator stated that SNGPL’s total operating income was estimated at Rs691,877 million against the revenue requirement of Rs607,403 million, showing a surplus of Rs66,524 million for FY25.
To adjust the surplus, Ogra revised the prescribed price down by Rs179.17 and set the average prescribed price at Rs1,635.90 per mmBtu.
Separately, it fixed the average prescribed price for Sui Southern Gas Company (SSGC), another public gas utility, at Rs1,401.25 per mmBtu with a reduction of Rs59.23, or 4%.
SSGC’s net revenue requirement was estimated at Rs289,501 million, which showed a surplus of Rs12,236 million. To eliminate the surplus, Ogra provisionally revised the prescribed price down by 4%, or Rs59.23 and set the average prescribed price at Rs1,401.25 per mmBtu for FY25.
Ogra has sought advice of the federal government on category-wise gas sale prices. Any revisions recommended by the government will be notified by the regulator. Until then, the existing category-wise natural gas sale prices will remain in place.
Ogra requested the SSGC board of directors to take effective measures to reduce the cost of service by closely monitoring all input costs. Additionally, it directed them to expedite recoveries from defaulters and reduce expenses related to the doubtful debt, litigation and associated cost.
It told SSGC to devise and implement an action plan to address the factors contributing to the unaccounted for gas (UFG), a term used to denote gas theft and leakage, specifically in Balochistan, as well as prioritise the resolution of low gas pressure complaints received from consumers in the province.
Moreover, SSGC was directed to implement the Ogra Gas (Third Party Access) Rules 2018 through finalising the overdue agreements or applications pending with the petitioner and take legal action against non-consumers/illegal connections to reduce the overall UFG in its franchise areas.
In the case of SNGPL, the regulator directed the petitioner to submit a review petition for its estimated revenue requirement under Section 8(2) of the relevant ordinance.
This review should consider the actual and anticipated changes in the international prices of crude and high sulphur fuel oil from May to November 2024 and the trend of rupee-dollar exchange rate, it said.
Regarding international arbitration, the regulator asked SNGPL to ensure compliance with all the agreed terms and avoid breaches, as these may lead to “imprudent” litigation costs.
These costs will be considered by the regulator at the time of determining the final revenue requirement, based purely on merit and prudence.
Furthermore, SNGPL was directed to implement the OGRA Gas (Third Party Access) Rules 2018 through finalising any outstanding agreements or applications pending with the petitioner.
Its board of directors was requested to take effective measures to reduce the cost of service by closely monitoring all input costs.
The regulator gave directives for rationalising the human resources cost by considering the changing business dynamics and the increased proportion of re-gasified liquefied natural gas (RLNG).
Additionally, it asked for prioritising all operational and administrative matters, additional hiring of manpower and the CBA while utilising the additional amount allowed by Ogra.
It called for expediting recoveries from defaulters and curtailing expenses related to the doubtful debt, litigation and related cost.
Published in The Express Tribune, May 22nd, 2024.
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