ISLAMABAD, Jan 17: The Oil and Gas Regulatory Authority (Ogra) has opposed the unbundling and privatization of the two gas utilities - SNGPL and SSGCL - and has asked the government to consider the repercussions in greater length, it is learnt.
The ministry of petroleum and natural resources had proposed unbundling of Sui Southern Gas Company Limited (SSGCL) and Sui Northern Gas Pipelines Limited (SNGPL) into a national distribution company (Discos) and a transmission company (Transco) for privatizing these two entities.
A decision on the subject is expected to be taken by the Economic Coordination Committee (ECC) of the cabinet which meets here on Tuesday. Prime Minister Shaukat Aziz will preside over the meeting.
The cabinet sources told Dawn on Monday that the ECC is likely to order further deliberations on the subject in view of reservations expressed by the Ogra because the regulator's role carried more weight in a deregulated oil and gas sector.
The sources said the Ogra had objected to both options suggested by the ministries of petroleum and privatisation. The two ministries, on the recommendations of the financial advisors, had suggested that either the companies should be privatized in the existing integrated structure or restructure them into distribution and transmission companies before privatization.
The Asian Development Bank, which is providing financial assistance for the restructuring of gas sector, had proposed that both the utilities should be unbundled into regional distribution companies on the pattern of Wapda, while the transmission system of the two companies should be consolidated in the form of one transmission company or the national carrier.
This meant that gas produced from different gas fields across the country should be injected into the national gas transmission system or national carrier which should sell gas to different distribution companies.
After complete unbundling and restructuring of the two companies, the companies should be privatized as separate entities, the ADB had suggested. The sources said the Ogra has pointed out that a lot of issues would have to be looked into before taking any decision on privatisation of the two gas utilities whatever might be the mode of privatisation or restructuring.
One of the key elements of restructuring is that both the companies have been issued exclusive transmission and distribution licences as integrated entities for a period of 30-years and a number of legal and financial aspects of the restructuring process would entail detailed deliberations.
The Ogra has already completed a major exercise under which the prices of gas produced from different fields have been equalised through a common basket to maintain uniform gas prices throughout the country. Had this exercise not been done, the gas prices in the southern part of the country might have gone up manifold.
The two companies are responsible for purification, transmission and distribution of natural gas in the country. The combined transmission network of the two utilities is about 8,000-km of high pressure and about 55,000-km of main distribution lines.
SNGPL is the largest gas transmission and distribution business in Pakistan with over two million customers. It was incorporated in 1963 as a private limited company and was converted into a public company in 1964.
SSGCL is also an integrated gas company having an exclusive distribution and sale licence in the provinces of Sindh and Balochistan. It serves more than 1.7 million consumers.
The SSGCL in its present shape was formed on March 30, 1989 following a series of mergers of three pioneering companies, namely Sui Gas Transmission Company Limited, Karachi Gas Company Limited and Indus Gas Company Limited.
