By Staff Reporter
ISLAMABAD: Pakistan plans to introduce a captive gas levy on power sector distribution to ensure fair competition between public and private gas suppliers, Dawn newspaper reported on Tuesday, as the country faces unannounced summer gas rationing despite a glut in natural gas and LNG supplies.
Lahore-based Sui Northern Gas Pipelines Limited (SNGPL), Pakistan’s largest gas distributor, has imposed unscheduled cuts on residential and commercial users amid disputes over pipeline capacity allocation for third-party sales. This follows a government push to defer over 170 LNG import cargoes and orders for local producers to scale back or shut fields to accommodate costlier LNG tied to international contracts.
The production cuts have hit local producers, including London-listed Oil and Gas Development Company Limited (OGDCL), eroding foreign exchange reserves and forcing consumers to pay high fixed charges for gas supplied only a few hours daily. The petroleum division, SNGPL management, and private firms declined to comment on the record, redirecting queries to other parties.
SNGPL has cut local gas production by over 300 million cubic feet per day (mmcfd), prioritising expensive LNG imports. This has triggered cash flow issues for producers like OGDCL, Gas and Oil Pakistan Limited (GHPL), and private firms, hampering domestic and international exploration.
Residential and commercial customers now receive gas for only two to three hours daily, timed around breakfast, lunch, and dinner. The cuts coincide with a government decision to double fixed monthly charges from July 1, 2025, inflating a Rs450 consumption bill to nearly Rs2,500 with taxes and fees.
OGDCL has publicly criticised the situation. “The less gas intake by SNGPL from Qadirpur, Nashpa, Chanda, Dhok Hussain, Mela, Bettani, Pirkoh, Togh and Loti fields and TAL … and by UPL from Uch fields due to less demand from power purchaser adversely impacted daily net production by 1,148 barrels of crude oil, 76 MMcf of gas and 55 tons of LPG,” the company said in a report to its board months ago.
“During the nine months ending March 31, 2025, OGDCL registered Sales Revenue of Rs310.907 billion (against Rs348.164 billion [in the same period last year]),” the report noted. “The Company’s Sales declined primarily due to forced production curtailment accompanied with reduction in average basket price of crude oil.”
With Pakistan’s energy sector circular debt surpassing Rs4.6 trillion, the government has allowed some producers to sell gas to third parties to ease financial strain. MOL-Pakistan and Petroleum Exploration Limited secured petroleum division approval to sell output from fields like Razgir and Zahra North to private buyers.
SNGPL opposed the Razgir deal, citing “market distortion” as a Rs791 per unit captive levy, mandated by the IMF for its industrial clients, does not apply to third-party suppliers, prompting customers to opt for cheaper private gas. Despite this, SNGPL’s board approved pipeline access for Razgir gas to a third party, with records showing nine of 11 members endorsing the decision, though management later denied the approval.
The Ministry of Law has since ruled that the captive power levy applies to all LNG and local gas consumers, public or private. It clarified that while producer-to-supplier sales are deregulated, supplier-to-captive power plant (CPP) sales fall under the Oil and Gas Regulatory Authority (Ogra), with prices set under section 8(6) and sections 43A and 43B of the Ogra Ordinance for levy collection under the Levy Act of 2025.
Copyright © 2021 Independent Pakistan | All rights reserved
