Billions at stake: Feud between oil ministry, OGRA reaches ECC

Ministry asks ECC to direct the regulator to shift gas firms’ losses to consumers.

ISLAMABAD:

In a desperate move, the Ministry of Petroleum and Natural Resources has complained to the Economic Coordination Committee that the Oil and Gas Regulatory Authority has refused to endorse its proposal to shift billions of rupees worth of losses, caused by gas theft and low recovery, to consumers.

In a summary sent to ECC, the ministry said it had made known its reservations to Ogra and asked the regulator to refrain from acting unilaterally.

“Under the circumstances, we are constrained to place the matter before ECC for a final decision,” it said. “The petroleum ministry in consultation with both gas companies (utilities) has developed a mechanism to determine actual volumes based on certain predefined factors.”

The ministry did not agree with Ogra’s plan that called for placing a cap on the lost gas volume on account of theft, minimum billing and low recovery in areas affected by law and order conditions, which could be charged from the consumers. Instead, the ministry asked ECC to shelve the regulator’s plan and approve its programme for implementation. In this respect, it sought ECC directives for Ogra.

According to sources, the cabinet had already agreed to pass Rs9 billion worth of losses on to consumers. However, it placed a condition which said that a cap should be imposed, meaning no further losses can be recovered from the consumers and gas utilities would have to bear the extra burden.

“In an attempt to avoid the discussion in the cabinet again, the petroleum ministry has sent the summary to ECC for approval,” a source said.

According to an official of Ogra, the regulator has proposed that financial year 2010-11 should be set as a base to determine the ceiling for the losses. However, the ministry says the losses suffered by the gas utilities in financial year 2011-12 should be set as a base.

“If 2010-11 is agreed as the base year, Sui Northern Gas Pipelines will be able to recover its losses, but Sui Southern Gas Company will get nothing as in that year it had shown no losses under the heads of theft, minimum recovery and low recovery in sensitive areas,” a source said.

Ogra has proposed that SNGPL can charge from consumers for theft of 6,607 million cubic feet (mmcf) of gas and 2,136 mmcf because of no recovery in areas hit by law and order problems. These were claimed by SNGPL in its final revenue requirement in 2010-11.

Ogra also wants that only metered volume should be allowed to the gas companies under the head of minimum billing.

Published in The Express Tribune, December 30^th, 2012.

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