Govt Hints at Another Big Increase in Gas Prices

A meeting of the Senate Standing Committee on Petroleum was held at Parliament House on Wednesday with Senator Mohammad Abdul Qadir in Chair, where officials of the Petroleum Division and the Oil and Gas Regulatory Authority (OGRA) hinted at another increase in gas prices from January 2024 onwards.

The officials revealed that the surge in prices was unavoidable, citing various challenges in the sector.

The officials said that the unavoidable increase in gas prices is a result of various factors, including the winter supply of LNG to the domestic sector, cross-subsidy considerations, and the provision of cheaper gas to the fertilizer sector.

Fertilizer Shortfall

The committee deliberated on the Urea shortfall in the country. Abdul Rasheed Jokhi, DG Gas, stated that Pakistan’s daily consumption stands at 4,000 MMCFD against the production of 3,000 MMCFD. However, local consumers used up 950 MMCFD, and almost 750 MMCFD has been utilized by fertilizer companies, namely FFC and Engro, with a cut-off of 350 MMCFD and 250 MMCFD.

Moreover, approximately 85 percent of gas utilized by fertilizer companies has been provided by Marri Petroleum, and 15 percent has been provided by other companies. Senator Mohammad Abdul Qadir was of the view that fertilizer companies have failed to cut the shortfall of urea and DAP despite getting gas at subsidized rates. He directed the ministry to provide details of fertilizer produced by these companies against the gas.

Gas Prices and Circular Debt

Senator Qadir maintained that the energy crisis is one of the biggest crises facing the country, resulting in a $32 billion import bill. He recommended that the ministry should initiate work on newly discovered sites to minimize this crisis.

Moreover, the committee discussed the issue of levying flat rates for gas consumers in Balochistan. DG Gas informed that the same tariff rates have been charged to all consumers across the country. However, consumers located in cold regions witnessed an increase in gas charges compared to consumers in hot regions due to a substantial increase in gas usage in winter.

Senator Qadir recommended that gas rates should be relaxed for consumers in cold areas during the winter season to allow them to use gas for their necessities.

Furthermore, the senate body highlighted the news of a recent increase in gas tariffs for local consumers. DG Gas stated that gas tariffs have not been increased for local consumers falling in the protected category, and almost 57 percent of total consumers fall in this category.

The committee was briefed about plans for the settlement of the circulated debt of PSO, SSGG, SNGPL, and OGDCL. DG Gas informed that the circular debt of the oil and gas sector currently stands at Rs. 2.8 trillion, with Rs. 2.08 trillion as the principal amount.

He added that the recent increase in gas tariffs will help maintain the circular debt at the current level, however, it will not result in any reduction in circular debt.

The committee took up the matter of the price of indigenous gas for various sectors in the country. Senator Mohsin Aziz remarked that Khyber Pakhtunkhwa and Balochistan are among the largest producers of gas in the country, but unfortunately, a major portion of this gas is being utilized in Punjab.

Moreover, the government has increased the per BTU price from Rs. 1,100 to Rs. 2,600 for KP industrial sectors and reduced the per BTU price from Rs. 3,600 to Rs. 2,700 for industrial sectors in Punjab. Senator Mohammad Abdul Qadir stated that the Government should formalize a policy for the import of LNG and allow private parties to import LNG to fulfill local demands. He also directed the ministry to submit details of the recent increase in the next meeting.

While discussing the current implementation status of committee recommendations, officials apprised that committee recommendations have been adopted, and a detailed report will be submitted upon its completion.

The committee also took up the matter of gas load shedding in Abdullah Gabol Goth during peak hours. Officials informed that Abdullah Gabol Goth, located at the tail end of the SSGC network, faces low-pressure issues due to system constraints. However, a 754-meter pipeline, along with a separate pressure regulation, has been approved for the area with a cost of Rs. 16.4 million, and low-pressure issues will be resolved upon the completion of this pipeline.

The meeting was attended by Senator Saadia Abbasi, Senator Fida Muhammad, Senator Mohsin Aziz, Special Secretary for Petroleum Division Bushra Aman, Chairman OGRA Masroor Khan, DG Gas Abdul Rasheed Jokhi, and other senior officials of relevant departments.