The donors have also underlined the need for controlling gas theft and leakages – called unaccounted for gas (UFG) – in the distribution system and bringing efficiency. PHOTO: FILE
ISLAMABAD:
International donors are pressing Pakistan to open the energy market for gas producers and remove the cap on gas prices — steps that will lead to direct supply contracts with consumers and increase of 1 billion cubic feet per day in gas production by 2015.
According to sources, donors are seeking these commitments in the face of billions of dollars in loans they are offering for the power sector. In this connection, a delegation of the Japan International Cooperation Agency (JICA) and Asian Development Bank (ADB) is holding talks with officials of the Ministry of Petroleum and Natural Resources.
At present, producers are bound to sell almost all the gas to two distributors – Sui Northern Gas Pipelines Limited (SNGPL) and Sui Southern Gas Company (SSGC), which supply gas to consumers across the country.
The petroleum policy allowed the producers to sell 10% of gas to consumers of their choice without involving the distributors, officials said, adding the donors were now seeking the go-ahead for 100% direct sales to consumers.
Under the Petroleum Policy 2012, gas prices are in the range of $6 to $10 per million British thermal units (mmbtu) for shallow and ultra-deep fields including $1 bonanza for first discoveries. In India, according to officials, the highest price is $8.50 per mmbtu.
If gas prices are compared with crude and furnace oil rates in Pakistan, they stand quite lower. The price of crude oil is $17.50 when calculated in terms of per mmbtu and furnace oil costs $17.75 including taxes.
The donors are asking Pakistan to enhance gas production by 1 billion cubic feet per day (bcfd) to 5 bcfd. They also call for boosting gas supplies to power plants in order to ease the burden of power subsidies.
Though an array of incentives have been unveiled under the petroleum policy, foreign investors have not given encouraging response so far. This is reflected in the fact that out of 50 blocks, auctioned during the Pakistan Peoples Party tenure, most of the exploration areas were won by state-run oil and gas companies.
Oil and Gas Development Company (OGDC) has got 29 blocks and Pakistan Petroleum Limited (PPL) took control of 10 blocks.
With poor law and order situation and persistent security risks, several foreign companies have pulled out of the country and some others are in the process of packing up.
“In this scenario, it will be difficult for the government to commit to enhancing gas output by 1 bcfd by 2015,” an official remarked.
The donors have also underlined the need for controlling gas theft and leakages – called unaccounted for gas (UFG) – in the distribution system and bringing efficiency.
At present, gas companies are facing 12% UFG losses, though the Oil and Gas Regulatory Authority (Ogra) permits only 4.5% to be charged from the consumers. The remaining losses are borne by the companies, which plague their financial results.
According to officials, 4% to 5% of losses are on account of theft and the rest is the result of leakages in the wake of network expansion to retail consumers instead of focusing on bulk customers.
Published in The Express Tribune, May 15th, 2014.
Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.
COMMENTS (1)
Comments are moderated and generally will be posted if they are on-topic and not abusive.
For more information, please see our Comments FAQ
In other words give them the license to cartelize and hold people at ransom and extract infinite profit based on ' free market economy'. Conveniently these will be off shore companies so they wont pay taxes......so you might as well forget about the illusionary 'trickle down effect'.......
The sheeple are far too mysmerized by charms of neo-liberal economics .........they remind me of the early followers of the Fuhrer.
These are resources of the state, owned by the state, they ought to be provided to the state and people at the cheapest possible rate.........why bring a third party to sell us our apples from our own orchards in their boxes!