Cut in payment: Ogra’s directive irks oil & gas exploration, production companies

ISLAMABAD: The Oil and Gas Regulatory Authority's (Ogra) direction to gas utilities to cut 25 percent of provisional payment to gas producers has irked oil and gas exploration and production companies.

In a letter to the managing directors (MDs) of the two gas utilities, (Sui Northern Gas Pipelines Limited (SNGPL) and the Sui Southern Gas Company (SSGC)), the authority has advised that payment to producers of natural gas be made strictly on price notifications.

The letter says, “It has been observed that the payment, in respect of some gas producers, is made without prescribed document inter-alia wellhead price notification leaving a room for retroactive adjustment, which, in case of such eventuality, impacts the consumers resulting to economic distortion”.

In case provisional payment is justified, it may be restricted to 75pc of the last notified price till such time that producers submit the requisite notification for the relevant period to the gas companies, the letter by the Ogra stated.

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The Ogra determines the revenue requirement of gas companies on bi-annual basis, wherein, “Cost of Gas” constitutes major part around 80-90 percent of the prescribed price.

For all logical and rational purposes, the cost of gas should be computed/estimated based on the wellhead gas price notifications issued by the OGRA biannually, in order to pass correct pricing signals to the economy, the letter states.

Sources at the Petroleum Division said that the price notification is the responsibility of the OGRA itself and due its own failure the regulator cannot unfairly held payments of already dwindling local oil and gas exploration and production sector.

The recent oil crisis has already highlighted the incompetency and flaws of the Ogra being the regulatory authority.

The inquiry commission put the OGRA on top of the blaming list, saying “much of the mess that abounds in the oil industry pertains to Ogra and the related laws/rules.”

Copyright Business Recorder, 2021