ISLAMABAD: The Oil and Gas Regulatory Authority (Ogra) is likely to reject ceiling of 7 per cent for unaccounted-for-gas (UFG) for gas companies recommended by a consultant on the grounds that it is ‘contrary to international practices’.
Sources told The Express Tribune that a consultant, Tariq Mustafa and Company, hired by Ogra to conduct a study on UFG, had submitted its report.
“The report is being evaluated,” an Ogra official said, adding the report should be evaluated by eminent experts who had worked in the authority like former chairman Muneer Hussain.
UFG, which denotes gas theft and leakage in the system, has continued to increase over the years. Of the two gas utilites, Sui Southern Gas Company (SSGC) had UFG level at 9.43 per cent in 2010-11 compared to 7.09 per cent in 2003-04 while Sui Northern Gas Pipelines Limited (SNGPL) had UFG level at 11.21 per cent in 2010-11 compared to 6.75 per cent seven years ago.
Major consumers, All Pakistan Textile Processing Mills Association and the Karachi Chamber of Commerce and Industry, had called for reducing UFG benchmark from existing 7 per cent to 5 per cent, the Ogra official said. “We have sent their demands to the Ministry of Petroleum and Natural Resources for consideration.”
Internationally, 1 to 3 per cent UFG is the standard but in Pakistan the benchmark is higher at 7 per cent, which accounts for a loss of Rs12.5 billion per year and is recovered from consumers.
According to the official, the consultant pointed out that the belief that 3 to 4 per cent of loss was due to gas theft was not correct, actually theft led to a loss of half the UFG ceiling.
Ogra fixed UFG target in 2003-04 at 6.5 per cent and revised it to 6 per cent for 2004-05, 2005-06 and 2006-07.
However, Ogra revised the base for determining gas prices for the two gas companies and also increased UFG benchmark to 7 per cent in a decision on September 24, 2010 while assessing revenue requirements of gas companies for 2009-10.
Ogra also allowed income from meter manufacturing plant, late payment surcharge, royalty from Jamshoro Joint Venture Limited and sale of condensate to be counted as non-operating income for financial year 2009-10.
Just few weeks after this decision, Ogra took another turn while estimating revenues for gas companies in 2010-11. This time, it set UFG ceiling at 5 per cent and put the income from meter manufacturing plant, late payment surcharge, sale of condensate and royalty from JJVL in operating income.
This prompted gas companies to move to courts, which granted a stay order. These decisions were made when Tauqir Sadiq was the chairman of Ogra whose appointment was declared illegal in a case in the Supreme Court.
The National Accountability Bureau (NAB) is also investigating the increase in UFG ceiling, which raised share prices of gas companies and brokers made billions of rupees.
According to sources, NAB believed that brokers had prior knowledge of the increase in UFG level and they made billions when share prices of the companies went up to Rs36 from Rs16 in September 2010.
Published in The Express Tribune, January 20th, 2012.
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Whether this is sealing or ceiling?