Encouraging investment: Competition watchdog issues policy note to OGRA

Recommends regulatory body to decide over pending licence applications.

ISLAMABAD:

The Competition Commission of Pakistan (CCP) has issued a policy note to the Oil and Gas Regulatory Authority, recommending it to exercise its power and encourage investment in the sector.

The CCP, through the note, has recommended that the regulatory body should act under the Ogra ordinance and take a decision regarding its licence applications by potential new entrants, in the flare-gas distribution, at the earliest to remove entry barriers.

The recommendation was made after concerns were raised by potential market entrants for flare-gas storage, distribution and transportation.

New market entrants need to apply for licences to Ogra. However, the CCP was informed by a potential entrant that its application remained pending, although all formal processes were completed. Hence, the CCP decided to assess all possible anti-competitive impacts of such an impediment.



Flare-gas is regarded as a by-product during the extraction of petroleum. Using flare-gas can help in augmenting the gas supply in the country. Until now, flare-gas has not been utilised in Pakistan but it may provide a stepping stone for new entrants that are aspiring to enter the market for the supply of natural gas. Flare-gas can be compressed for easy storage and transportation using gas bowsers.

Ogra responds

Ogra, in its response to the commission’s queries, noted that the monopoly of Sui Northern Gas Pipelines Company Limited (SNGPL) and Sui Southern Gas Pipelines Company Limited (SSGCL) for transmission and distribution of gas ended on June 30, 2010. Ogra stated that the current flare-gas policy issued by the Federal Government did not provide any guidance to determine the producer price for flare-gas, the tariff applicable for future similar cases and the tariff applicable for potential consumers.

The CCP noted that Ogra’s mandate was to foster competition and increase investment in the midstream and downstream market for petroleum. However, in the matter of issuing licence for flare-gas distribution where, all the requirements for issuance of licence were met, not taking a decision on the issuance of licences became a hindrance for new entrants in the market.

The CCP believes that the institutional delay in the issuance of licence increases the time for a new entrant to enter the market, thus, benefitting the existing firms and making the market less competitive. It also noted that, at a time when Pakistan was facing an energy crisis, barriers to entry in sectors such as natural gas were a cause for concern as they restricted the much needed investment.

It, therefore, recommended Ogra to take a decision on the issuances of licences at the earliest as it will not only help attract investment but also push incumbent service providers to be more efficient and innovative, which will in turn benefit the consumers.

Published in The Express Tribune, January 3^rd, 2014.

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