SNGPL Managing Director Arif Hamid says his company's system loss stood at 11.7 per cent in October 2011 which was scaled down to 11.4 per cent in November. He is of the view that six per cent gas losses are globally acceptable. - File photo

 

ISLAMABAD: The Sui Northern Gas Pipelines Limited and Sui Southern Gas Company Limited are causing a cumulative annual loss of about Rs300 billion to national economy, almost six times the losses caused by power sector, because gas shortage leads to civil unrest and affect businesses, transport and households.

The colossal loss has so far remained off the public eye because the gas shortage affects the public life only for three winter months and gas companies are paid at least 17 per cent guaranteed return on assets even if these continue to make losses. If these losses are controlled, about 700 million cubic feet of gas a day could be added to the overall supply, reducing the current shortfall by almost half.

A senior government official in the planning commission told Dawn that the transmission and distribution losses – described in the official jargon as unaccounted for gas – of the two utilities that went up to 13 per cent were resulting in wasteful consumption of 350 million cubic feet per day (mmcfd).

Given the fact that furnace oil is used as replacement fuel for power generation and industrial use, every million British Thermal Unit (mmbtu) costs the economy an additional burden of $20 per mmbtu, according to planning commission's member energy Shahid Sattar. As such, the daily additional cost on import of furnace oil comes to about $7000, translating into an annual additional burden of $2.55 billion, he said.

Likewise, domestic geysers are described as gas guzzlers whose efficiency could be increased by 20 per cent by putting in a small conical baffle costing Rs500 per piece in every geyser and the efficiency could be further improved by up to 45 per cent by installing instant geysers. These two measures alone could provide another saving of 250 mmcfd, reducing import bill by $450 million or Rs40 billion in three winter months.

In comparison, the transmission and distribution losses of Wapda's power companies currently stand at about 22 per cent which translates into an annual loss of about Rs60 billion. The official said the power losses at about 10-12 per cent were globally acceptable compared with 2-3 per cent losses in the gas distribution system.

SNGPL Managing Director Arif Hamid says his company's system loss stood at 11.7 per cent in October 2011 which was scaled down to 11.4 per cent in November. He is of the view that six per cent gas losses are globally acceptable.

Ogra, in consultation with gas companies, had set a target of reducing system losses to 4.5 per cent by financial year 2010-11 when actual losses stood at about seven per cent and have since been increasing.

The planning commission official said that Ogra had successfully brought down gas distribution losses to 4.5 per cent through mandatory one per cent loss reduction every year until 2008 but the previous Ogra chairman appointed on political grounds, and then sacked on orders of the Islamabad High Court and then the Supreme Court of Pakistan, raised these benchmarks to about 11 per cent.

These additional gas losses, the official said, were also resulting in tariff increase for all consumers because of overstretched distribution system in the wake of politically-motivated supply of gas to villages as 70 per cent of the cost of fresh gas connections in villages was borne by gas utilities.

This additional cost estimated at over Rs70 billion over the past four years has not only created an additional demand of about 500 mmcfd but has also translated into gas tariff as expenditure incurred by the companies because the two utilities are guaranteed 17 per cent and 17.5 per cent return on assets under international covenants with the World Bank.

From the companies' point of view, one per cent system loss translates into a direct loss of 45 million cubic feet per day (mmcfd) or about Rs5 billion per annum, but the economic loss in value chain is even higher than Rs300 billion per annum if calculated on the basis of increased production cost. Hence every molecule of this precious and depleting resource needs to be efficiently transformed into value addition and growth in gross domestic product (GDP).

The economic value multiplies manifold in view of the fact the supply is already short of demand by about 50 per cent in winter months. Giving an example, the official said a private domestic fertiliser plant was generating an annual revenue of about Rs15 billion by consuming only 35 mmcfd of gas. Its ultimate contribution to agriculture, employment generation and the national economy was manifold and not included in these estimates, the official said.

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