Beginning in July, at the start of the new fiscal year, natural gas prices in Pakistan are anticipated to rise by up to 50%. This follows the completion of financial projections by the Oil and Gas Regulatory Authority (Ogra) for two financially troubled, state-run gas utilities. Ogra’s findings have been passed on to the government to issue an official notice.
For the fiscal year 2023-24, Ogra projects an estimated revenue requirement (ERR) of Rs 697.4 billion to be gathered from gas consumers. The Sui Northern Gas Pipeline Limited (SNGPL), the supplier to Punjab and Khyber-Pakhtunkhwa, is expected to raise Rs358.4 billion. On the other hand, the Sui Southern Gas Company (SSGC), supplying Sindh and Balochistan, is projected to gather Rs339 billion.
The average cost, set by Ogra, for SNGPL, is now Rs1,238.68/mmBtu, an increase of 50% or Rs415.11 compared to the current price. Similarly, for SSGC, the average price is Rs1,350.68/mmBtu, marking a 45% or Rs417.23 hike.
Ogra explained that over 85% of the prescribed price comprises the gas cost, passed onto the consumer. The agreement between the Government of Pakistan and the gas producer companies defines this cost.
The regulator’s decision is pending government notification, expected within 40 days. Once approved, SNGPL and SSGC will be authorized to collect billions of rupees from their consumers.
Initially, SNGPL sought an increase of 286%, claiming an ERR of Rs1,044.12 billion, including an Rs560.38 billion shortfall from the previous year. Similarly, SSGC proposed a 42% increase to recover Rs331.68 billion.
The regulator has suggested abandoning the distinction between protected and unprotected slabs for consumers, suggesting a price of 1238.68/mmBtu. This will result in an up to 923% price hike for low-slab consumers but benefit high-consumption slabs that were previously charged up to Rs3,100/mmBtu. A substantial price increase is also recommended for roti tandoors.
Despite higher prices for zero-rated consumers, gas prices will fall for CNG stations, cement, fertilizer, power stations, and independent power producers (IPPs). However, feedstock gas prices for the fertilizer industry will more than double.
The current prescribed gas prices for various sectors range from Rs510/mmBtu to Rs1,805/mmBtu. Ogra now proposes a standardized price of Rs1,238.68/mmBtu across these sectors.
