ISLAMABAD: After two years of consultations with key energy sector players, the World Bank has concluded that Pakistan should reduce its gas losses from 10 per cent to one-to-two per cent to meet international standards.

The World Bank that has been studying Pakistan’s gas system under a $272 million (Rs26 billion) natural gas efficiency project has noted with concern that the Sui Southern Gas Company Limited (SSGCL) has reportedly lost $160 million (Rs15 billion) in 2011-12 alone owing to system losses.

The findings of the World Bank – finalised after detailed consultations with ministries of petroleum and natural resources, finance, economic affairs, planning commission and the management of SSGC – have come at a time when the Sui gas utilities are resisting calls by the Oil and Gas Development Authority for reducing their benchmark system losses to below seven per cent.

“The bank’s project team sees no reason why Pakistan in the longer term, with efforts subsequent to this project, should not be able to reach international standards for UFG (unaccounted for gas) at 1-2 per cent,” said the final aide-memoire provided to the government of Pakistan last week. Key to success would be to attack the UFG problem by segmenting the distribution gird, bringing UFG in renovated segments down to below one per cent and keep it at that level, it added.

The bank noted with concern that since it started technical discussions with the SSGC in February 2010, the magnitude of the UFG problem had risen from 33 billion cubic feet (BCF) per year to an estimated 40BCF for fiscal year 2011-12.

“Increase in gas prices has exacerbated the cost of UFG to approximately $160 million for that year,” it added.

The World Bank said that UFG has been on the rise for more than a decade and was anticipated to reach 10.1 per cent this year.

The cost of UFG has risen even faster, whether based on cost of domestic gas production or the value of imported petroleum products that could have been saved if all the UFG were available for consumption.

Equally disturbing is the fact that while the SSGC has been able to improve its UFG data over the last two years, it is not yet clear what portion of losses could be attributed to leakages, gas theft, metering errors (slowing or malfunctioning), accounting errors and other errors, although leakages apparently constitute by far the largest component.

Balochistan has a high proportion of unaccounted for gas as compared to the proportion of gas consumption. Interestingly, about 85 per cent of UFG in Balochistan is in Quetta, where the security situation is manageable for SSGC and where the problem could be efficiently addressed.