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Consultants oppose piped gas to ‘uneconomical’ categories

Consultants oppose piped gas to ‘uneconomical’ categories

ISLAMABAD: Independent consultants appointed on the instructions of the government have recommended limiting the expansion of piped-natural gas to uneconomical consumer categories and replacing it with cylindered-gas to contain huge energy losses amid scarce domestic resources.

“Bottled (cylinder) LPG is the perfect option for homes that do not have access to a piped network,” said KPMG Taseer Hadi & Co appointed by the Oil and Gas Regulatory Authority (Ogra) under a decision of the Economic Coordination Committee (ECC) of the cabinet.

This apparently is in contrast to a recent decision taken by the ECC at the request of Petroleum Minister Shahid Khaqan Abbasi to provide liquefied petroleum gas to consumers through pipeline network linked with LPG air-mix plants starting with three such plants in his constituency — areas around Murree.

The ECC was informed that 65 LPG air-mix plants would be set up at a cost of about Rs18 billion by two gas companies — SNGPL and SSGCL — struggling to bring down their system losses currently stood at 15 and 13 per cent, respectively. The consultants were of the opinion that this level of system losses was too high.

The petroleum ministry is already negotiating with a Russian firm to set up 60 such plants with costs to be made part of the weighted average cost of natural gas.

The consultants have also proposed a special “cost of service study” to determine actual cost of transporting gas to end-consumer based on individual cost drivers for each consumer class, spread geographically across the gas network.

“This will lead to revision of tariff and further identification of new consumer classes. This will enable differential pricing based on cost of service for specific customer segments and geographics,” the study said.

This too also goes against the current policy of the government to expand gas pipeline network on a political basis to provide subsidised natural gas to people who then not only suffer themselves as the gas utilities struggle to meet gas demand, particularly in winter with dwindling domestic gas production, but also add miseries to the existing consumers in domestic as well as industrial and business sectors.

The consultants were of the view that bottled LPG was not only easy to provide to areas where metering and segmentation were not possible, but cylinders could easily be operated with only a flick of a switch or the press of a button and delivered to consumers at doorstep. Cylinders can also be equipped with auto-change regulators having a visual indicator to show when a cylinder is empty and needs to be replenished.

The consultants said gas theft had many reasons, but key drivers also include continuous growth of gas distribution network and expectation of free supply in gas-producing areas. Also, the process of allowing claims of gas theft by non-consumers was prone to errors as such volumes were based on judgements and hypothesis of gas companies and lack of validation mechanism at Ogra for independent verification.

The consultants also questioned the gas losses claimed by the companies and allowed by the regulator because of law and order problem and noted that if the gas companies could not operate in such areas, there should be evidence that other utilities and state machinery were also unable to carry out their operations in those areas.

Moreover, “only the federal government can declare an area as “law and order affected” where the gas companies can claim any relief for the losses. “The claims of SSGCL and SNGPL against gas losses in the law and order affected areas have grown approximately 80pc and 200pc over the past five years and need to be curbed to restrict the growing levels” of total gas loss claims by the gas companies.

The consultants said deficiencies also existed in measurement capacities of the gas companies. While the repor­ted losses of SSGC and SNGPL had increased by 75pc and 63pc in the past decade, their claims for such an increase because of expansion of residential consumers appeared unfounded.

Published in Dawn, February 20th , 2017

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