Losses in gas supply chain: Panel rejects PD’s response to PMIC’s report

ISLAMABAD: A parliamentary committee rejected the Petroleum Division (PD)’s response to the Prime Minister’s Inspection Commission (PMIC)’s report regarding an estimated $2 billion worth of annual losses in the natural gas supply chain due to incompetence and mismanagement and its recommendations.

The documents submitted before the parliamentary committee available with Business Recorder pointed out that the PMIC asked the World Bank be contacted for possible re-activation of Gas Sector Efficiency Project (NGEP) abandoned in 2016.

The PD states that the Sui Southern Gas Company Limited (SSGCL) abandoned the WB’s NGEP as the original plan kept on changing at the end of the WB, the response against the bids was very poor and commercial banks refused to establish LCs for local bidders. Local loans were available on a very low mark-up comparatively at that prevalent time and the WB loan was not available by Sui Northern Gas Pipeline Limited (SNGPL) due to a higher interest rate than the one prevalent in the market at that time.

In another observation, the PMIC says the definition of the UFG benchmark and its progressive implementation should be in line with international standards (around four percent with progressive downward movement), if required, some areas where enforcement is not possible, be ring-fenced (without allowing for inefficiency).

In its response, the PD says the OGRA informed that the definition of the UFG given in the rules and UFG Benchmark are separate definitions. However, the PD has a three-year UFG reduction plan of both gas companies approved by the Economic Coordination Committee (ECC).

The PMIC recommended the PD exert pressure on the oil and gas exploration and production companies with regard to efficient operations (metering of wellhead, flare, inhouse use) and impose penalties where meters (quality and quantity meters) are found defective for more than a pre-defined period of time. In response, the PD says it has noted. The penalty will be imposed in accordance with the relevant rules in case of defective and non-availability of the metering system at the reception of the plant is found.

The report further says the gas companies to improve their gas metering, billing, and reporting procedures with emphasis on correct data measurement and avoiding estimation to the best possible extent. Director General (Gas) to help implement this policy through directives as well as by acting with the gas companies. The PD says the SOPs for billing are defined in the relevant billing manual in accordance with the OGRA’s recommendations.

The report has also asked for the OGRA to reduce/rationalise UFG rate rider (including retainage) for RLNG price determination based on actual FSRU audit as well as reconsidered UFG benchmark for gas companies. The PD argues that the OGRA informed that retainage as per international practices was capped provisionally at 0.75 percent and was subject to be firmed up upon provision of audited figures of the same.

Copyright Business Recorder, 2022