Piling on the pressure: Petroleum ministry looks set to inject expensive gas into SSGC network

The LPG-air mix introduced in the system can potentially raise gas tariffs by an average 9.9%.

ISLAMABAD:

Gas consumers should be prepared for another hike in the gas tariff, as the government looks set to strike a deal under which it will inject expensive gas into the Sui Southern Gas Company (SSGC) network.

The plan, put forth by the petroleum ministry, seeks to inject 50 million cubic feet per day (mmcfd) of LPG-air mix into the SSGC system, which will raise gas prices by an average 9.9% for all consumers except domestic consumers. The move comes after the Oil and Gas Regulatory Authority (Ogra) recently raised gas tariffs by 6.14% to meet revenue requirements.

The LPG-air mix gas will cost a hefty $25 per unit, higher than the price of LNG or gas to be imported from Iran, Turkmenistan. For comparison, Pakistan is to get gas from Iran and Turkmenistan at $10 to $11 per million British thermal units (mmbtu), while LNG suppliers are asking for $18 per mmbtu.



Sources said that the petroleum ministry had moved a summary to Economic Coordination Committee (ECC), asking it to approve the injection of 50 mmcfd of LPG-air mix (synthetic natural gas) into the system at a higher rate of Rs2,400 ($25) per mmbtu, against the existing price of Rs422 ($4.4) per mmbtu, for fiscal 2012-13.

“It is, however, submitted that since this gas will barely increase supplies to the domestic sector, the impact of the increase in the weighted average may not be passed on to domestic consumers,” the petroleum ministry said in documents moved to the ECC for approval.

The petroleum ministry also informed the ECC that the finance committee of the SSGC board of directors had been authorised to procure material for LPG-air mix plants for up to $25 million. At present, the finance committee has only approved the 50 mmcfd Synthetic Natural Gas (SNG) co-mingling system project (the project under discussion) for placement before the ECC for its approval.

The SSGC has also submitted details of proposals for the award of contract to three firms. SSGC wants to award the contract for the design, manufacturing and commission of the SNG Plant to Aether DBS, USA; automation of local installation and commissioning to Dynamic Engineering Automation; and supply of compressors to Atlas Copco-Belgium.

The petroleum ministry also wants a temporary waiver of the Public Procurement Regulatory Authority rules in the award of contract for the LPG-air mix plant. It wants to do away with the requirement of having individual project proposals approved by the ECC. It has informed the ECC that, in view of the fact that competitive procurement under PPRA rules is the responsibility of gas utility companies, the ECC may consider dispensing with the requirement to approve individual projects. “However, the ECC may continue to ask for prior clearance of proposals subject to its approval of the proposed use of gas and impact on gas prices,” the petroleum ministry added.

When contacted, Petroleum Secretary Dr Waqar Masood was not available for comments.

Published in The Express Tribune, January 3^rd, 2013.                

Like Business on Facebook to stay informed and join in the conversation.