Starting Jan 1: The little gas there is, may cost a lot more

Petroleum ministry has sent a 14 to 207% hike summary to PM.

ISLAMABAD:

There is little gas in the country, the petroleum minister told parliamentarians a few days ago – and now the little that there is, will cost a lot more starting January 1, 2012.

The petroleum ministry finalised a summary of hikes in gas prices on Wednesday, and now seeks formal approval from the prime minister, sources told The Express Tribune.

According to the summary, consumers will face a hike between 14 and 207 %, in order to generate Rs385 billion for gas utilities and import projects.

If the summary is approved, the price of Compressed Natural Gas (CNG) would rise from Rs67 per kilogramme (kg) to Rs80 per kg – a hike of Rs13 per kg.

Liquefied Petroleum Gas (LPG) will cost an additional Rs14 per kg after the imposition of Petroleum Levy worth $120 per ton on locally-produced LPG. This hike would generate Rs4 billion in additional revenue for the government in a year.

Why the hike?

The proposed major hike in gas prices is a combination of two specific charges – a 14% increase in gas prices determined by the Oil and Gas Regulatory Authority (Ogra), and the imposition of a Gas Development Surcharge (GDS) to generate funds for import projects, including the Iran-Pakistan (IP) gas pipeline.

The former, increase in gas prices, will allow the Sui Northern Gas Pipeline Limited (SNGPL) to generate Rs217 billion and Sui Southern Gas Company (SSGC) Rs148 billion in six months till June 30, 2012 to meet revenue requirement. The government would collect Rs20 billion during the six-month period through GDC to finance gas import projects like IP and TAPI.

Who pays what?

Domestic and commercial consumers, and the cement sector, will face a uniform price hike of about 14%. These consumers have been exempted from the imposition of GDS.

Industrial units will face a hike of about 17% while CNG stations in region 1 (the Potohar region, including Islamabad and Rawalpindi, Balochistan and Khyber-Pakhtunkhwa) and 2 (Sindh and remaining areas of Punjab) will face increases of about 39 and 28% respectively.

The power sector, including the Karachi Electric Supply Company, will face a 13.6% hike in gas tariff while Independent Power Producers will pay an additional 34.6%.

The highest hike, 207%, is for fertiliser plants, which presently receive gas at a highly subsidised rate of Rs102 per million British thermal units (MMBTU).

Revenue for new projects

Against requests of 30 and 14 % tariff hikes by SNGPL and SSGC respectively, Ogra recommended 14 and 11 % tariff hikes to the government for the two companies.

If approved, SNGPL will receive an extra Rs15 billion for LNG infrastructure projects and Rs10 billion for financing parliamentarians’ schemes while SSGC will get an additional Rs5 billion for new gas schemes.

Being a relatively cheaper source of fuel, gas was being wasted in different sectors, said an energy analyst. The imposition of additional charges would help avoid its wastage, the analyst added.

Another expert said the GDS would be an unnecessary burden on consumers since the IP pipeline is in doldrums due to US pressure while TAPI is still a pipedream due to its planned passage through a volatile Afghanistan.

At present, gas is supplied to the fertiliser sector at Rs102 per mmbtu, IPPs at Rs377.39 per mmbtu, industrial consumers Rs434.18 per mmbtu, power sector Rs447.14 per mmbtu and CNG stations at Rs571.88 per mmbtu.

(Read: Energy crisis)

Published in The Express Tribune, December 29^th, 2011.