AIRLINK 186.31 Increased By ▲ 1.39 (0.75%)
BOP 10.28 Increased By ▲ 0.67 (6.97%)
CNERGY 7.53 Increased By ▲ 0.27 (3.72%)
FCCL 37.01 Increased By ▲ 0.58 (1.59%)
FFL 14.66 Increased By ▲ 0.32 (2.23%)
FLYNG 24.39 Increased By ▲ 0.11 (0.45%)
HUBC 129.30 Increased By ▲ 2.89 (2.29%)
HUMNL 13.51 Increased By ▲ 0.71 (5.55%)
KEL 4.45 Increased By ▲ 0.16 (3.73%)
KOSM 5.98 Increased By ▲ 0.04 (0.67%)
MLCF 43.42 Increased By ▲ 1.15 (2.72%)
OGDC 200.97 Increased By ▲ 2.46 (1.24%)
PACE 6.07 Decreased By ▼ -0.01 (-0.16%)
PAEL 39.65 Increased By ▲ 1.90 (5.03%)
PIAHCLA 16.93 Decreased By ▼ -0.16 (-0.94%)
PIBTL 7.81 Increased By ▲ 0.07 (0.9%)
POWER 9.01 Decreased By ▼ -0.21 (-2.28%)
PPL 171.88 Increased By ▲ 3.79 (2.25%)
PRL 34.71 Increased By ▲ 1.96 (5.98%)
PTC 22.35 Decreased By ▼ -0.07 (-0.31%)
SEARL 105.16 Increased By ▲ 3.28 (3.22%)
SILK 1.07 No Change ▼ 0.00 (0%)
SSGC 35.33 Decreased By ▼ -0.20 (-0.56%)
SYM 17.52 Decreased By ▼ -0.40 (-2.23%)
TELE 8.25 Increased By ▲ 0.08 (0.98%)
TPLP 11.70 No Change ▼ 0.00 (0%)
TRG 66.23 Increased By ▲ 0.11 (0.17%)
WAVESAPP 11.75 Decreased By ▼ -0.04 (-0.34%)
WTL 1.53 No Change ▼ 0.00 (0%)
YOUW 3.70 Decreased By ▼ -0.09 (-2.37%)
BR100 11,738 Increased By 128.2 (1.1%)
BR30 34,641 Increased By 524.7 (1.54%)
KSE100 111,378 Increased By 1055 (0.96%)
KSE30 34,797 Increased By 386.1 (1.12%)

The complexities of the energy sector are not easy to resolve. The IMF set a structural benchmark to end gas supply to Captive Power Plants (CPPs) with the objective of forcing them to transition to the national grid. This was necessary as grid consumption was declining while supply was increasing.

However, there was a problem: not all CPP users have access to the grid, and even those who do may face reliability issues. Additionally, some CPP operators claim their efficiency is higher than the most advanced plants on the grid, yet they have been reluctant to allow government audits to verify these claims.

Due to strong opposition from CPP operators, the government renegotiated with the IMF to increase gas prices for CPPs rather than cutting off supply entirely. The aim was to incentivize them to transition to the grid. This policy shift is a step in the right direction and has long been advocated in this space. With higher gas prices, truly efficient operators can continue, while those lacking grid access may start investing in the necessary infrastructure while still having access to gas.

The gas price for CPPs has been raised from Rs3,000/mmbtu to Rs3,500/mmbtu, with an additional 20 percent levy to be implemented in stages through biannual 5 percent increments. A power utility expert in the South estimates that only 5-10 percent of the 1,000-1,200 CPP consumers will shift to the grid at Rs3,500/mmbtu. However, once the penalty (the additional 20 percent levy) is fully in place and grid prices decrease, as the government claims they will, the majority are expected to transition.

Those with full grid access and a cost advantage will naturally move to the grid, though their numbers are currently low. However, with the implementation of the levy and a potential reduction in tariffs, more marginal consumers will continue shifting. Those needing capital investment to build the infrastructure for grid connectivity—costing between Rs2-9 billion in some cases and requiring 6-18 months of construction—may also begin making arrangements.

Meanwhile, another factor is causing concern for Sui gas companies: third-party access to the gas system and imported RLNG. Under the previous power policy, up to 10 percent of the domestic gas supply could be allocated to third-party suppliers using the Sui network. That share has now increased to 35 percent. These third-party suppliers, unburdened by inefficiencies and cross-subsidies, will invariably offer cheaper gas, making them a preferred option for many consumers.

This shift leaves Sui gas companies in a precarious position. Over time, their most reliable, high-paying consumers have been moving away, while tariffs for the subsidized consumers they used to support have not increased proportionally. As a result, Sui gas companies are facing financial difficulties. Compounding this problem is their obligation to purchase imported RLNG under long-term agreements with Qatar. Due to limited pipeline capacity, domestic gas supply is being reduced to accommodate RLNG.

Currently, Sui companies’ largest consumers are CPPs. Their transition to the grid further worsens the financial strain. The situation is aggravated by increased third-party access, which enables independent suppliers to serve large consumers like CPPs. Now, proposals are circulating to allow third-party access for RLNG imports as well. If these suppliers can offer lower prices, Sui gas companies may face bankruptcy, as senior Sui officials warn.

In summary, the issue of excess power supply in the energy sector is being partially addressed by shifting CPP consumers to the grid. However, this move is exacerbating problems in the petroleum sector, where Sui gas companies’ financial stability is deteriorating.

For heaven’s sake, the government must develop an integrated energy policy that takes all these dynamics into account before making critical decisions.

Comments

200 characters
NAVEED Jan 31, 2025 04:48pm
Gas prices shounot increased it is coming from the land belongs to people of the nation. Infrastructure built to process and deliver it for comercial and domestics purpose must have already paid off.
thumb_up Recommended (0) reply Reply
NAVEED Jan 31, 2025 04:50pm
Gas companies are over staffed must be right sized. there is Coruption in these companies only right honest people should be part of these gas companies. More oil and gas wells should be dug.
thumb_up Recommended (0) reply Reply
NAVEED Jan 31, 2025 04:53pm
More digging of oil and gas wells by efficient ogdc staff will make nation energy independent but energy exporting. Staff change at these companies are crucial. it is same as state Bank . management.
thumb_up Recommended (0) reply Reply
Mahboob elahi Jan 31, 2025 06:44pm
Gas companies need to have TRANSMISSION ONLY and distribution sales be separated privatised
thumb_up Recommended (0) reply Reply
KU Feb 01, 2025 01:26pm
Amusing but meaningful when you sake heaven, or hell for that matter. They have forgotten the importance of both, greed n gluttony hasn't been declared a sin for nothing. Law n justice is absent.
thumb_up Recommended (0) reply Reply
Mera Naam Joker Feb 02, 2025 07:36pm
But my nieces and nephews need their daily pocket allowance$. Their weekly Oxford tuitions are also due. What about my salary? I do not take salary for heaven's sake!
thumb_up Recommended (0) reply Reply