The government is diverting Rs. 210 billion worth of Re-Gasified Liquefied Natural Gas (RLNG) to the domestic sector to guarantee eight hours of gas availability for residential consumers during the current winter season
But unlike in the past four years, the Rs. 210 billion cost of RLNG diversion will be recuperated from consumers through a new pricing mechanism established by the caretaker regime.
This decision is in response to the unresolved RLNG diversions in the previous four winters, contributing to the escalation of the gas circular debt to Rs. 2,900 billion.
The Energy Ministry’s Senior official talking to the media assured that the cost of RLNG diversion amounting to Rs. 210 billion will be collected through the new pricing mechanism, preventing an increase in the gas circular debt.
Furthermore, there is a budget of Rs. 29 billion available to mitigate the circular debt of Rs. 250 billion accumulated due to the non-recovery of RLNG costs in the past four winter seasons. The official outlined that the new mechanism incorporates guidelines in the OGRA ordinance for cost recovery through the gas companies’ revenue requirement petitions.
Sui Northern Gas Pipelines Limited (SNGPL) will submit a petition to OGRA seeking recovery of diversion costs during the Nov-Feb period as part of normal revenue requirements under Section 8(2). This new pricing mechanism has received approval from the Special Investment Facilitation Council.
The official stated that the IMF had asked the government to charge ring-fenced RLNG prices to every consumer to prevent further build-up of circular debt but the caretaker government has met the IMF benchmark by implementing guidelines in the OGRA Ordinance. This ensures that RLNG costs will be recovered from domestic consumers, preventing a further accumulation of circular debt.
Pakistan sources RLNG from abroad under term agreements, including five cargoes from Qatar at 13.37 percent of Brent, two from Qatar at 10.2 percent of Brent, and one from ENI at 12.14 percent of Brent.
However, with the demand for gas increasing in December, the caretaker regime has imported two cargoes from the open market via spot bidding and one from SOCAR, ensuring a total availability of 1000 mmcfd.
Due to a reduction in local gas production to 3.2 bcfd, decreasing by 9-10 percent annually, the government faces the dilemma of either maintaining gas availability for eight hours by diverting RLNG or confronting potential shortages.
