LPG air-mix, CNG or LNG-based pipeline projects: Anti-domestic user guidelines not approved

MUSHTAQ GHUMMAN

ISLAMABAD:  Economic Coordination Committee (ECC) has reportedly not cleared anti-domestic consumer policy guidelines regarding LPG air-mix, CNG or LNG-based pipeline distribution projects.

Official documents showed that the ECC was informed that in pursuance of its decision of December 26, 2007, the ministry of petroleum issued policy guidelines to Ogra on such projects undertaken by Sui Northern Gas Pipelines Limited (SNGPL) and Sui Southern Gas Company Limited (SSGCL).

Currently, SSGCL is supplying LPG air-mix to Gwadar and Nushki (both in Balochistan) and Kot Ghulam Muhammad (in Sindh). Besides, an LPG air-mix plant has also been installed at Surab (Balochistan) which is yet to be commissioned.

The petroleum ministry argues that given gas shortages resulting in supply curtailments to various sectors, gas companies are contemplating to extend the supply of LPG air-mix to new areas as well as existing consumers as a peak saving strategy.

However, the approved policy guidelines do not provide flexibility to gas companies to initiate such projects without specific directions of the president, prime minister, cabinet or the ECC of the Cabinet.

With a view to providing flexibility to gas companies for initiating such projects, policy guidelines need to be revised in the following manner:

(i) These guidelines are applicable to distribution projects for supply of piped LPG air-mix, LNG or CNG by the Sui Gas Companies to retail consumers, subject to approval of their board of directors; and (ii) Ogra will include the cost of LPG air-mix in uniform cost of gas formula to compute the weighted average cost of gas (Wacog).

The ECC was informed that injection of LPG air-mix into the system was expected to increase the weighted average cost of gas from Rs308.95 per mmbtu to Rs315.04 per mmbtu for 10 mmcfd air-mix and to Rs398.53 per mmbtu for 150 mmcfd air-mix.

During the ensuing discussion, it was stated that the proposal will lead to substantial increase in tariff for gas consumers, especially domestic consumers. It was also stated that because of scarcity of domestic gas, the government would have to take steps to ensure availability of commodity to all sectors without any preference.

It was explained that Ogra had opposed the proposal and its views needed to be given serious consideration. It was suggested that the ECC should approve the proposal in principle and constitute a committee for deciding other details.

The ECC cleared the concept, in principle, and constituted a committee, comprising ministers for petroleum (Convener) and water and power, the deputy chairman of the Planning Commission and secretaries of the economic affairs and petroleum ministries. The committee was tasked to (i) work out the mechanism for air-mix of LPG in the system by ensuring transparency and (ii) determining pricing formula based on lowest cost and its impact on consumer price.