Ogra may relax UFG losses for SNGPL, SSGC

KARACHI - The Oil and Gas Regulatory Authority (OGRA) may relax Unaccounted for Gas (UFG) losses for the two gas marketing companies, SNGPL and SSGC to 7 per cent with an aim to improve their earnings, industry sources told TheNation. Since there is no clue what the final outcome regarding the relaxation would be, according to research estimates, a one percent relaxation in UFG loss (from FY11 target UFG loss of 5 per cent to 6 per cent) will have positive impact of Rs2.4/share and Rs 1.1/share on SNGPL and SSGC, respectively. If government relaxes UFG losses to 7.0 per cent (as per the demand of SSGC and SNGPL), the earnings impact on SNGPL and SSGC would be Rs4.8 and 2.2 per share, respectively. The estimates further revealed that the actual UFG losses for both gas utilities would remain at 8 per cent for next few years. It may be pointed out here that for FY10, SNGPL has projected UFG loss of 6.05 per cent (versus target of 5.5pc) whereas SSGC is projecting UFG loss of 6.33 per cent. In order to check the efficiency of these gas utilities and to limit their line losses, government set UFG targets for local gas companies. UFG is the term used for those units which are not billed (due to theft) or loss during the transmission of gas to the consumers, said Farhan Mahmood, energy sector analyst at Topeline Research. He further said it is the difference of gas purchases and sales after adjusting internal consumption. For this, OGRA has allocated upper and lower limits. This means that if actual UFG losses will be higher than the upper limit, the entity would bear the full loss from its own profits. On the other hand, it can retain the savings in the event of performance being better than the lower target while absorb the 50 per cent of the loss on account of UFG between the lower and upper target, he added. It is pertinent to mention here that actual UFG losses are far above the upper targets due to system leakages and theft.

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