ISLAMABAD: Pakistan’s gas regulator has formally initiated a nationwide public consultation to review the long-standing asset-based return formula for gas utilities, a move that could significantly reshape how Sui Northern Gas Pipelines Limited (SNGPL) and Sui Southern Gas Company (SSGC) earn profits amid market liberalisation and mounting sectoral stress.
In a public notice, the Oil and Gas Regulatory Authority (Ogra) said it is reassessing the rate of return (ROR) allowed to gas transmission and distribution companies under the existing tariff framework. The review follows a federal government directive to restructure the gas utilities by moving away from guaranteed returns linked to fixed assets.
Ogra said the initiative reflects evolving gas sector realities, including widening supply-demand gaps, price volatility and the gradual opening of the gas market to competition. The regulator has engaged consultancy firm KPMG to conduct the study, and the first draft report has already been submitted. A public hearing has been scheduled in Islamabad on Friday to seek stakeholder input.
Earlier, public consultation sessions were held in Lahore and Peshawar, while further sessions are planned in Karachi on January 12 and Quetta on January 14, 2026.
The review coincides with broader market reforms, including the government’s decision to allow gas utilities to allocate up to 35 per cent of gas to third parties, compared with 10 per cent previously. The move has attracted interest from private gas marketeers and drawn support from exploration and production companies, which expect improved pricing flexibility to ease cash flow pressures and revive delayed projects.
Since 2018, Ogra has permitted utilities to earn returns based on their net fixed assets—a model critics argue incentivises pipeline expansion despite declining indigenous gas supplies. Official figures show that SNGPL’s operating costs increased from Rs66 billion in FY2019-20 to Rs94 billion in FY2023-24, while its earnings nearly doubled to Rs38.9 billion over the same period, even as gas availability fell. Industrial consumers have blamed this structure for rising tariffs, higher utility profits and worsening gas shortages.
The utilities, however, have pushed back against any abrupt changes, warning that key performance benchmarks—particularly unaccounted-for-gas (UFG) targets—are closely tied to the existing asset-based return regime and cannot be dismantled without broader structural adjustments.
The debate comes at a time when the gas sector is burdened with a circular debt estimated at around Rs3 trillion, which has severely strained the energy supply chain. Expensive LNG imports, financed by SNGPL through Pakistan State Oil, have further compounded the financial pressure on the system.
Story by Israr Khan
