Cabinet to mull new gas connections


With nearly 2.8 million gas connections pending on the network of Sui Northern Gas Pipelines Limited (SNGPL), the cabinet is likely to give priority to gas connection requests for politically motivated schemes.

Already facing a gas crisis, SNGPL had to divert expensive liquefied natural gas (LNG) to domestic consumers in winter in the wake of government directives to overcome the shortage. Now, the gas utility is paying the price as it has to recover Rs78 billion for the LNG it diverted in the past two winter seasons.

The company estimated that it would bear a burden of Rs69 billion in the recent winter on account of diversion of LNG to the domestic consumers.

Interestingly, there is no legal framework available with the government to recover the LNG price from domestic consumers. The federal government had made several attempts to woo provinces to introduce a weighted average price mechanism but provinces were not ready to cooperate.

SNPGL operates in Punjab and Khyber-Pakhtunkhwa. Although Punjab’s share in domestic gas production is the lowest, LNG is being mainly consumed by the province.

Officials say the government has formed a sub-committee comprising parliamentarians to monitor the gas development schemes. Now, the committee wants authorisation to approve the schemes.

SNGPL and Sui Southern Gas Company (SSGC) are the two public sector gas utilities engaged in the transmission, distribution and sale of natural gas in the country.

As per the government’s policy and in view of socio-economic developments, the gas development schemes are initiated for supplies to the economically backward areas.

In order to implement the schemes, the government approved the per consumer cost criteria based on which the gas utilities carry out the gas development schemes and also seek the grant of incremental cost from the federal government where the project cost exceeds the per consumer cost criteria.

Government grant was provided from various programmes initiated from time to time under different titles ie Khushhal Pakistan Programme, Peoples Works Programme, Millennium Development Goals (MDGs), Sustainable Development Goals (SDGs) Programme, etc.

Currently, as per the approved SDGs Achievement Programme (SAP) guidelines, which are amended from time to time, the gas schemes are being undertaken with approval of the SAP steering committee, which accords approval for the schemes as well as authorises release of funds.

In order to consider and recommend gas development schemes where no government funds are required, the steering committee constituted a sub-committee. The sub-committee has so far held six meetings wherein a number of gas development schemes have been approved where no government funds are required and the entire cost is borne by the gas companies.

The sub-committee, in its sixth meeting held on November 30, 2020 while approving the gas schemes, decided and directed that the Petroleum Division may move a summary to the federal cabinet to authorise the SAP sub-committee to approve new gas development schemes against savings from the previous programmes.

The committee also directed the Petroleum Division to consider and process an advice for SNGPL with respect to provision of 300 gas connections to the newly commissioned networks/ gas schemes.

The committee advised that the Petroleum Division may move a summary in that regard to the federal cabinet for policy approval.

The ultimate beneficiary of the gas development schemes are domestic consumers, accordingly, for the provision of gas connections under the newly commissioned network a turn-merit policy is in vogue at the end of gas utility companies.

Court decision

However, in the past a policy for provision of 300 gas connections on the newly commissioned network was in vogue, which was being followed by both the gas utilities until the Supreme Court took a decision on March 6, 2018 and dropped proceedings against both the gas companies for the provision of gas connections against the turn-merit policy/ extraneous or political pressure.

The companies were also directed by the apex court to submit periodical reports on the provision of new gas connections and in compliance with the directive, the gas utilities periodically submit the report to the Supreme Court.

Pending gas connections

The Petroleum Division had informed the cabinet that approximately 2.8 million gas connection applications were pending under the SNGPL network while the Oil and Gas Regulatory Authority (Ogra) set a target of 0.4 to 0.6 million connections per annum, which included 10% urgent fee out of the total.

Currently, the gas companies are executing development schemes approved by the SAP steering committee and SAP sub-committee.

Because of the backlog, the commissioning of newly laid networks will be delayed, which will deprive the gas company of the return on asset in its annual revenue requirement determined by Ogra until they are commissioned besides putting financial burden on the company for the repayment of a loan at which asset has been developed.

Accordingly, based on recommendations of the SAP sub-committee, the Petroleum Division had submitted proposals for consideration.

In order to commission the newly developed network under a gas development scheme, the gas utilities will seek and process 300 applications of consumers per village/ new locality falling within the area of gas development scheme.

The SAP sub-committee may be authorised to approve new gas schemes against savings available with the gas utilities from the previous programmes ie, MDGs, SDGs, etc.

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