CNG, captive power: plan in the offing to raise gas tariff

Under power sector reforms programme, the government is planning to increase gas prices, for CNG sector and captive power generation plants, to reach price parity with petroleum products with the objective of discouraging use of gas as a cheaper product.
"The summary to increase gas prices for CNG and captive power plants to achieve parity with other fuels is under preparation," according to briefing by the Ministry of Water to USAID in a presentation on December 15, 2010. Friends of Democratic Pakistan (FoDP)s, Energy Sector Task Force has urged the government to rationalise and restructure gas tariff to recover supply and distribution costs and minimise cross subsidies across various sectors to enhance economic growth.
The Ministry of Water and Power informed USAID that since 2007 power generation cost increased due to change in fuel mix by 30 percent, rupee depreciation by 35 percent and increase in fuel prices by 30 percent. Major drivers of precarious financial situation are: (i) shift towards use of more fuel oil in a rising oil price environment and rupee devaluation; (ii) reduced gas allocation for power generation; (iii) no tariff increases between 2003 and 2007; (iv) non-payment of tariff differential; and (v) increased arrears, especially from provinces.
The Ministry wants to allocate the entire gas reserves to the power sector from new discoveries in a bid to enhance share of gas in energy mix and reduce dependence on furnace oil.
The Ministry of Petroleum (MoP) and the Water and Power Ministry are already in a tug of war to allocate the entire available gas at Kunnar/Pasakhi and other gas fields for power generation at the cost of fertiliser manufacturers, industry and CNG sectors.
The Petroleum Ministry argues that the ECC of the Cabinet has already allocated 250 mmcfd gas from Pasakhi/Kunnar field to SSGC, that would share 50 percent gas with SNGPL through swap arrangements. The Ministry of Petroleum has opposed reopening of the settled issue and urged the Ministry of Power to upgrade inefficient plants to generate more power with the existing gas allocation.
At present, SNGPL and SSGC are facing a shortfall of more than one billion cubic feet gas per day (bcfd) which is projected to reach 1.8 bcfd in 2014-15 despite addition of Pasakhi/Kunnar gas field, other small fields and anticipated commissioning of Iran Pakistan (IP) gas pipeline and LNG project. With the progressive depletion of the major gas fields, it may not be possible for SSGC/SNGPL to meet the demand of existing consumers if all available gas from new discoveries is allocated to the power sector.