OGRA says resisted government pressure to issue CNG licences

Despite ban, govt’s persistence to acquire permits suggests sector is still profitable.

KARACHI: Running a compressed natural gas (CNG) station is still so lucrative that the outgoing government wanted to issue 200 new CNG station licences just a few days before the end of its five-year term, which the Oil and Gas Regulatory Authority (Ogra) declined.

“Just before the end of its term, the outgoing government had asked us to issue 200 new licences for CNG stations on March 15, 2013, but we refused to do so,” Ogra Chairperson Saeed Ahmed Khan revealed this on Tuesday. Khan was talking to the media following a public hearing on gas and CNG prices that was organised at the Pearl Continental hotel.

In total, the outgoing government issued 1,533 CNG station licences in its five-year term, he said.

Industry people say that the government issued almost half of these licences after the ban imposed on issuing new permits due to acute gas shortages in the country. Unfortunately, most of these licences were issued in the northern areas, which were facing severe gas shortages even then.



The public hearing was attended by all associations of the CNG sector who pleaded that their margins had squeezed considerably after Supreme Court’s orders on CNG pricing. Few months ago, the Supreme Court gave a ruling in which it reduced CNG pricing from around Rs85 per kilogramme (kg) to Rs65 per kg – something that irked the CNG sector.

What is important to note that even after a considerable cut of Rs20 per kg in CNG prices, powerful lobbies were trying to obtain new CNG licences suggesting that the sector is still very much financially viable. This also put a big question mark on the claims of the CNG sector that it is ‘operating on just Rs4 to Rs5 per kg profit margin’.

Chairman of the regulator also informed that gas leakages accounts for more than 45% of the unaccounted-for gas (UFG) – one of the biggest challenges for gas distributors in Pakistan.

To overcome gas leakages, gas distributors – Sui Southern Gas Pipelines and Sui Northern Gas Pipelines – should improve their systems by working on smart metering, he stressed.

On the other hand, representatives of the CNG sector said that the sector was fast losing its attraction as many investors were now considering shifting their investments out of the sector.

Published in The Express Tribune, April 24^th, 2013.

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