CCoE defers approval for unbundling of Sui gas companies

ISLAMABAD   –  The Cabinet Committee on Energy on Thursday deferred the approval for the unbundling of the Sui gas companies and constituted a sub-committee to give recommendations on the gas sector reforms.

The Cabinet Committee on Energy (CCoE), which met under the chairmanship of Federal Minister for Planning, Development and Special Initiatives Asad Umar, also directed to first explore the possibility of doing the reforms locally instead of hiring the consultants for the purpose, official sources said.

The sources maintained that the meeting was informed that UFG is causing signification losses and its control is becoming increasingly difficult under the existing large bundled system. There is a need to create separate cost centers in the forms of Separate Legal entities so that accounting and operational performance can be measured with better reliability. The existing consumers are accustomed to lower domestic gas prices and are not willing to pay the delivered cost of LNG. Thus, a significant cost mismatch is created for the utility companies, the meeting was informed.

The power sector has not taken the expected volumes of LNG and export and zero rated industry is not paying the full cost of LNG. LNG is being diverted to domestic users paying lower tariff. Thus cost revenue mismatch for the utility companies is growing wider. In view of the above, present and future requirements for more gas translates into additional liability for the gas utility companies and consumers.

An independent National Gas Transmission Company (NGTC) may be formed. The newly formed transmission company would operate as a common carrier for the existing/newly formed gas distribution companies as well as, under third party access rules/codes promulgated by OGRA. The company would not be engaged in the purchase or sale of gas and will only be mandated to transport gas. Multiple gas distribution companies would be created with unified principles by both SNGPL & SSGCL within the area of their jurisdictions for operation of smaller business units/distribution companies. The companies would be established on technical and economical basis including population, network density, gas demand, workload and management/supervision and efficiency for the sustainability of newly formed gas distribution companies. 

A mechanism of weighted average sale price equalization or any other suitable mechanism would be developed for gas sale pricing and the same would be implemented simultaneously. 

The Petroleum Division is of the considered view that for sustainability of this sector, it has become imperative to actively to pursue a gas reform agenda.

Cabinet Committee on Energy discussed a proposal of Petroleum Division related to reform and restructuring of the gas transmission and distribution system. CCoE directed the Petroleum Division to prepare a comprehensive strategy for regulatory and policy reforms of gas sector. It was further directed that short term measures for efficiency enhancement and loss reduction should immediately be implemented. Chairman of the committee said that for the longer term, roadmap to a competitive gas market is required where private sector should perform an active role. 

The CCoE also set up a sub-committee for regular monitoring of the overall progress on reform agenda and implementation of CCoE decisions. The meeting was attended by Minister for Energy Omar Ayub Khan, Federal Minister for Information and Broadcasting Shibli Faraz, Advisor to Prime Minister on Finance Abdul Hafeez Sheikh, SAPM on Petroleum Nadeem Babar, and official of various divisions.

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