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Oil, gas companies seek 32pc increase in RLNG price

Oil, gas companies seek 32pc increase in RLNG price

ISLAMABAD: With the petroleum ministry’s support, three state-run oil and gas companies have sought a cumulative 32.3 per cent increase in the price of regasified liquefied natural gas (RLNG) to improve their profits even on system losses without fresh investments.

The Oil and Gas Regulatory Authority may reconsider on Monday the RLNG price it had determined on Oct 7 at $8.64 per million British Thermal Unit (MMBTU) by disallowing various price build-ups.

The authority has been asked by the oil and gas trio to revise RLNG price to $11.135 per MMBTU by allowing them actual system loss at about 12.5pc besides service and administrative charges and margins on RLNG price. Ogra is scheduled to hold a public hearing for the cost build-up on Monday.

An Ogra member told Dawn that the authority “seems inclined to give an upward revision in RLNG price through majority vote”. He said Ogra had already determined RLNG price under Petroleum Levy Act of 1961 on the orders of the federal government, but the law did not have any provision for price review.

The three companies — Pakistan State Oil, Sui Southern Gas Company and Sui Northern Gas Pipelines Limited — have written to the regulator that the RLNG price approved at $8.64 per unit on Oct 7 did not offer them substantial incentive to be in RLNG supply business, hence the increase.

The Ogra member said the record showed the three firms have now changed their strategy to increase RLNG price by proposing increased rates for the textile industry first to set a principle followed by its extension to other consumers — power, fertiliser and CNG, etc. This would be in addition to their formal requests for price review.

On the basis of price of LNG delivery ex-ship (DES) has come down from $7.72 per MMBTU in Oct to $7.49 per MMBTU, according to price sheet provided to the petroleum ministry. The SNGPL has now requested an increase in LNG terminal charges to Engro at $1.43 per MMBTU instead of 66 cents approved by Ogra.

The SNGPL has also pleaded that retainage (gas lost during regasification and transfer to pipeline network) be allowed at 1.5pc of total cost of LNG which worked out at $0.135 per MMBTU. This was previously allowed at 0.75pc in accordance with the tender documents.

The SNGPL has now demanded building the cost of unaccounted for gas (UFG) loss at about 10.9pc which now works out at about $0.82 per MMBTU. Ogra had previously allowed 0.5pc transmission loss at $0.039 per MMBTU.

On top of that, the SNGPL cost of service has been demanded at $0.73 per MMBTU and $0.13 per MMBTU for the SSGC. Moreover, administrative margin for two gas companies has been demanded at $0.10 per MMBTU. All these factors were previously disallowed by Ogra in October last year.

In addition, the margin for the Pakistan State Oil has been demanded at 4pc (about $0.30 per MMBTU) of LNG DES price. This was previously allowed by Ogra at 1.82pc (about $0.14 per MMBTU).

After inclusion of general sales tax, the gas companies have demanded revised RLNG price of $11.135 per MMBTU based on imported LNG price of $7.49 per MMBTU.

The PSO has contended that Ogra had allowed the margin as the sum of estimated cost on taxes and the operating cost on LNG without incorporating any adequate return. “PSO being a commercial entity is also responsible to provide adequate return to its shareholders as they normally expect a reasonable return on new ventures initiated by the company.”

Ogra had determined a provisional RLNG price in October last to facilitate imports, saying about a dozen mandatory documentary proofs had not been placed on the Ogra record.

Published in Dawn, January 4th, 2016

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