By Staff Reporter
ISLAMABAD: Pakistan’s energy regulator ordered the steepest increase in imported natural gas prices since the country began buying the fuel a decade ago, a move that will raise costs for millions of consumers already contending with elevated inflation, while the government redirects billions of rupees in unrelated savings toward debt reduction rather than price relief.
The Oil and Gas Regulatory Authority, Ogra, said on Friday it had raised the price of regasified liquefied natural gas for August to $25.84 per million British thermal units for customers of Sui Northern Gas Pipelines Ltd., which serves Punjab and Khyber Pakhtunkhwa provinces. Customers of Sui Southern Gas Co., which supplies Sindh and Balochistan, will pay $25.09 per mmBtu. The increases amount to 32.4% and 34.6%, respectively, and translate into a retail price of roughly 7,204 rupees per mmBtu.
The jump follows a roughly 15% increase in July, when rates were set at $19.52 per mmBtu for Sui Northern customers and $18.63 per mmBtu for Sui Southern customers. Since February, when the rate stood at $10.45 per mmBtu, prices have climbed about 148%.
The increases stem from Pakistan’s inability to secure any of its contracted cargoes from Qatar, the world’s largest LNG exporter, after the country’s energy infrastructure came under attack. State-run Pakistan LNG Ltd. was forced to buy all five of the country’s August cargoes on the spot market, where prices are both higher and more volatile than under long-term contracts. Pakistan State Oil, which imports Qatari gas under two long-term, crude-linked agreements, brought in no cargoes for the month.
QatarEnergy declared force majeure and suspended shipments to customers across Europe and Asia, including Pakistan, after drone strikes hit its energy infrastructure on March 2. Pakistan has since had no clear path back to the cheaper, contracted Qatari supply that has historically underpinned its LNG import strategy. Absent a resolution to the conflict, the country is likely to remain reliant on costlier spot-market purchases, leaving consumers exposed to continued price swings.
Five cargoes represents the third-lowest monthly volume Pakistan has imported since it began buying LNG, underscoring the extent to which supply constraints, rather than demand, are driving the price surge.
The rising cost of imported gas is already showing up in electricity bills. The fuel cost for RLNG-based power generation rose to 31 rupees per unit in May from 13.72 rupees per unit in April, a more than doubling that reflects the pass-through of higher gas costs to the power sector.
Separately, Ogra also raised prices for liquefied petroleum gas by 5.4% for August, setting the rate at 254.32 rupees per kilogram from Aug. 1, up from 241.43 rupees per kilogram in July, an increase of 12.89 rupees per kilogram.
Withheld Savings
In a disclosure that came weeks after the underlying decision was made, Ogra revealed it had cut the prescribed prices used to calculate gas utility revenue by 134 rupees per unit, a reduction of 7.4% that would generate savings of approximately 50 billion rupees. Rather than passing those savings to consumers through lower gas bills, the government plans to direct the funds toward reducing the gas sector’s circular debt, which stood at approximately 3.5 trillion rupees as of the most recent reporting, according to a senior government official.
The determination underlying those savings was finalised on June 23 but was not posted to Ogra’s website at the time, a departure from two decades of practice at the regulator, which has historically published its price determinations publicly while simultaneously sharing them with the government. Ogra also typically holds press briefings on its determinations and on the revenue requirements of gas utilities.
The regulator did not respond to queries about the determination for more than a month. It uploaded the documents to its website this week only after interveners at public hearings raised concerns about the delay.
The government has likewise declined to comment publicly on the matter. It has told the International Monetary Fund that consumer-facing gas prices will remain unchanged, even as the underlying revenue requirements determined by Ogra for both utilities fell.
As a consequence of the delay, Ogra has yet to formally notify consumer-end gas rates for the current fiscal year, which are required by law and under Pakistan’s IMF program to take effect from July 1 each year.
Revenue Requirements
The determinations set annual revenue of approximately 817 billion rupees for the two utilities combined during the current fiscal year, comprising 501 billion rupees for Sui Northern and 315.8 billion rupees for Sui Southern.
For Sui Northern, the prescribed gas price tied to its revenue requirement was cut to 1,719 rupees per mmBtu for the 2026-27 fiscal year from 1,853 rupees per mmBtu a year earlier, a reduction of 134 rupees per mmBtu that produces an annual revenue surplus of approximately 46.3 billion rupees.
“In exercise of its power under section 8(1) of the Ordinance, the Authority, after taking into consideration points raised by interveners, clarifications provided by the petitioner, scrutiny of the petition and available record, provisionally determines the surplus in estimated revenue requirement for the said year at Rs46.279bn,” Ogra said in its determination.
The regulator said the surplus would be applied against shortfalls from prior years, in keeping with a June 30, 2024 decision by the federal cabinet directing that prior-year shortfalls be adjusted to the extent possible during the current financial year. Ogra set Sui Northern’s estimated revenue requirement, net of other revenues, at 501.11 billion rupees, or 1,718.96 rupees per mmBtu, for the current fiscal year.
For Sui Southern, the prescribed price was reduced by 86 rupees per mmBtu, generating savings of 2.5 billion rupees. Ogra said it had provisionally determined a surplus of 1.421 billion rupees in the utility’s estimated revenue requirement for the year. The regulator said an additional 1.073 billion rupees in recovery was available under the currently notified prescribed price, leaving 2.494 billion rupees to be applied against prior-year shortfalls under the cabinet’s June 2024 decision.
Sui Southern’s revenue requirement, net of other revenues, was set at 315.773 billion rupees, or 1,691.24 rupees per mmBtu, for the current fiscal year, down from 1,777 rupees per unit before the June 30 determination took effect. The utility had sought an estimated revenue requirement of 1.274 trillion rupees, which included 545.28 billion rupees in unrecovered shortfalls from prior years.
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