ISLAMABAD: The Oil and Gas Regulatory Authority (OGRA) has announced a reduction in average gas prices for Sui Northern Gas Pipelines Limited (SNGPL) by 10% and Sui Southern Gas Company (SSGC) by 4%, effective from July 1, 2024.
After holding hearings on the petitions of these gas utilities, OGRA assessed their estimated revenue requirements (ERRs) and identified surpluses, necessitating a decrease in gas prices to maintain financial stability. The revised provisional prescribed prices are designed to support the financial health of both SNGPL and SSGC while offering relief to consumers.
The new prices await the federal government’s advice regarding the sale price of gas for each category of retail consumers. OGRA assured that any adjustments will maintain the overall decrease in average prescribed prices, allowing gas companies to meet their total revenue requirements.
New Prescribed Prices
SNGPL: The average prescribed price is set at Rs1,635.90 per Million British Thermal Units (MMBTU), a reduction of Rs179.17 per MMBTU (10% decrease).
SSGC: The average prescribed price is set at Rs1,401.25 per MMBTU, a reduction of Rs59.23 per MMBTU (4% decrease).
OGRA also addressed the financial shortfall claimed by SNGPL for previous years, reducing the claimed shortfall from Rs862.6 billion to Rs580.5 billion to reflect a more accurate financial position.
Additional Directives
Unaccounted For Gas (UFG) Benchmarks: The authority directed both companies to maintain their previous UFG benchmarks for fiscal year 2024-25 until a new UFG study is conducted. For SNGPL, the UFG benchmark for distribution and transmission will remain at 6.25% and 0.36%, respectively, with an estimated loss of Rs8.99 billion. For SSGC, these benchmarks are set at 6.25% and 0.14%, with an estimated loss of Rs23.75 billion.
Impact on Consumers and Industry
The reductions are expected to benefit consumers and industries dependent on natural gas, alleviating financial burdens and promoting economic stability and growth in Pakistan. This decision follows significant price adjustments and financial challenges in the energy sector, including previous requests from both SNGPL and SSGC for substantial price hikes to cover revenue shortfalls and operational costs.
Earlier, SNGPL had requested a 147% increase to set the average gas price at Rs4,446.89 per MMBTU, and SSGC had sought to raise the average price to Rs1,740.80 per MMBTU. These requests were part of efforts to address revenue shortfalls and operational costs, following a 67% increase in the natural gas tariff approved by the caretaker government in February 2024 under IMF conditions.
OGRA’s decision to cut gas prices aims to balance the need for financial stability in the energy sector with the goal of providing economic relief to consumers.
Story by Israr Khan
