Govt engages provinces in crucial gas policy shift

Updated 15 Oct 2020

Email

The government has announced major shift in gas policies towards introducing a weighted average cost of local and imported gas. — Creative Commons/File
The government has announced major shift in gas policies towards introducing a weighted average cost of local and imported gas. — Creative Commons/File

ISLAMABAD: The government on Wednesday announced major shift in gas policies towards introducing a weighted average cost of local and imported gas (WACOG), improving cheaper availability of LPG and bifurcate transmission and distribution business of gas utilities.

Speaking at a news conference, Energy Minister Omar Ayub Khan said his ministry was engaged with provinces ‘for give and take’ on board introduction of WACOG for local gas and imported LNG because supply of local gas was not sustainable going forward.

“Not agreed fully”, he replied when asked if Sindh government had been convinced over WACOG – an average price of local and imported gas having a price differential of over Rs900 per unit. He said his team had very positive and constructive discussions with Balochistan, Khyber Pakhtukhwa and Sindh in recent weeks on the subject.

Special Assistant to Prime Minister on Petroleum Nadeem Babar said the previous government had declared liquefied natural gas as a petroleum product through an act of parliament to facilitate its import which would have to be amended through another act of parliament to redefine LNG as gas for introducing the concept of WACOG.

Important price changes on the way

Because of these lacunae, the LNG, even though being supplied to residential and commercial consumers to meet shortages, could not be charged at actual cost because it was ‘ring-fenced’ as a petroleum product. He said the matter would be resolved through a summary to be approved by the Economic Coordination Committee (ECC) of the Cabinet for the price mechanism and then for cabinet approval.

He said the domestic gas was depleting very fast and its supply was unsustainable. At present about three million applications for gas connections are pending with the gas companies and the government was restricting its expansion as only 400,000 applications were being entertained for fresh connection.

Babar said a summary was being taken to the Cabinet Committee on Energy (CCoE) in its upcoming meeting to divide gas pipeline system initially into two separate entities – transmission and distribution businesses. He said the number of gas companies would then be further increased in due course.

According to him, the new Liquefied Petroleum Gas policy to be presented for approval would envisage comprehensive mechanism to bring down prices of LPG at affordable level and ensuring its availability in far flung areas of the country. A committee was constituted under Deputy Planning Commission which would present its report this month.

Talking about recent gas shortage in Karachi, SAPM said the Sindh government had not yet informed the centre regarding promised cabinet decision to provide right of way for laying down 17km long gas pipeline from Port Qasim to Sui Southern Gas Company (SSGC) network near Pakland to transport 150-200mmcfd (million cubic feet of per day) of additional LNG into the system.

“We have already completed work on 12km long proposed gas pipeline for which land from private sector had been acquired and awaiting approval for right of way (ROW) to lay down rest of the 5km long pipeline,” he said.

He further said that out of 1,200mmcfd of gas requirement in Sindh, about 900mmcfd was utilised in Karachi alone. In case the provincial government allows ROW this week, the centre will complete the gas pipeline by third week of December to resolve the gas shortage through pumping additional RLNG gas. The requirement pipe was available and contractors fully mobilised and would be working round-the-clock, the SAPM added.

Babar continued that on the request of Karachi-based industry, the federal government was providing them gas at Rs930 per mmcfd under five-month (October-February 2021) arrangement. March-April onwards, they would receive gas from SSGC system at previous gas rates.

Referring to a question, he said the cost of North South Pipeline has been increased by changing its route and diameter of pipeline. The new route of around 1700 km pipeline would be laid between Karachi to Lahore and the diameter of the gas pipe would be 48 inches to 56 inches.

He said the capacity of gas transmission was also enhanced from one billion cubic feet per day to 1.6bcfd. The pipeline would have the capacity to increase the gas volume up to 2bcfd keeping in view the future need of the gas which could reach up to 3bcf in the next ten years.

Talking about the policy structure for upgradation of fuel quality of existing oil refineries, he said that Euro-V grade petrol has already been replaced from September 1 but 60 per cent of total consumption of diesel which refineries are producing should be Euro-V by Jan 1, 2021.

Published in Dawn, October 15th, 2020