In response to recent discussions and media reports highlighting concerns over inflated HR costs and the notable increase in gas prices within the current fiscal year, Sui Northern Gas Pipelines Limited (SNGPL) seeks to provide comprehensive clarity and factual insights into the structure of gas pricing and the underlying reasons for any adjustments.
SNGPL emphasizes that the Operating Cost, inclusive of HR expenses, accounts for merely 4% of the total gas price. The substantial majority, 94%, is directly related to the acquisition cost of gas, with the remainder dedicated to covering returns on capital expenditures (CAPEX).
Key Factors Influencing Price Adjustments:
- Depletion of Indigenous Gas Resources: SNGPL underscores the critical issue of dwindling national gas resources, necessitating the redirection of Regasified Liquefied Natural Gas (RLNG) to domestic consumers, especially throughout the winter months. Given that the average cost of RLNG approximates Rs. 3,500 per MMBTU—significantly higher than the Domestic Sector Average Sale Price of about Rs. 1,100 per MMBTU—a resultant differential of Rs. 231 Billion has emerged. This gap justifies the recent price adjustments, aiming to recuperate the costs of RLNG diversion and ensure the uninterrupted functionality of the LNG supply chain.
- Rise in Indigenous Gas Costs: An additional increase of Rs. 69 Billion in the cost of indigenous gas has been observed, further contributing to the need for price revisions.
- Currency Devaluation: The depreciation of the Pakistani Rupee by 55% over the past two years has notably impacted gas purchase contracts, which are denominated in U.S. dollars and pegged to the prices of Crude Oil/Furnace Oil.
Despite these economic pressures, SNGPL points out that the average gas rate for the protected class of domestic consumers remains at Rs. 513 per MMBTU, considerably lower than the cost price of Rs. 1,674/MMBTU. This favorable rate benefits 4.4 million consumers within the SNGPL network, accounting for 60% of total consumers, whose bills in the winter month of February stayed below Rs. 2,000, taxes included.
Moreover, despite price increases, a subsidy projected at Rs. 128 Billion is anticipated to be extended to domestic consumers of SNGPL during FY 2023-24.
SNGPL further highlights that the gas sector in Pakistan is rigorously regulated, guided by the OGRA Ordinance, 2002. To ascertain the revenue requirements of gas companies, OGRA has been conducting public hearings since 2002, holding sessions twice annually for the determination of gas prices.
The ongoing public hearings by OGRA for FY 2024-25, set to be effective from July 1, 2024, are not expected to result in immediate gas price alterations.
SNGPL remains committed to transparently communicating the complexities of gas pricing to the public, ensuring a comprehensive understanding of the factors that necessitate periodic adjustments.
gas rates should have been increased decades ago. ppl have been mercilessly burning this precious resourse for almost free. na govt ko fikar the na awam ko just votes lene k chakron me. ab jhatka lga h. bhugto ab