KPMG report suggests OGRA to permit 7.1pc UFG allowance for SSGC and SNGL

Karachi: Consultant KPMG Taseer Hadi and Co hired by Oil and Gas Regulatory Authority to provide independent advice for the proposed breakup of SNGPL and SSGC has advised 7.1pc unaccounted for gas (UFG) losses to gas utilities in consumer tariff for a period of five years.

KPMG has said SSGC and SNGPL should be given an additional allowance of 2.6pc for additional UFG losses because of thefts and leakages in their respective transmission and distribution networks.

As per a local newspaper report, these UFG charges being proposed are much higher than the current 4.5pc permitted by OGRA, aside the additional 2pc allowance which is granted for law and order, theft issues, minimum metering etc.

According to KPMG’s analysis, the real UFG losses had increased immensely in the last decade or so, reaching to around one billion cubic feet per day (BCFD) of which 550 MMCFD losses were in SNGPL’s system and around 450 MMCFD in SSGC’s.

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It added that both SNGPL/SSGC had reached an agreement with OGRA over an incentive package in 2003-04 to decrease UFG losses to 6pc, but in reality it kept on rising.

KPMG said that neither of the two state-owned gas entities had a measurement system available to quantify UFG losses properly.

The study lamented that both SNGPL and SSGC “are unable to determine the actual difference between the volumes received and dispatched for a particular network segment.” It added that claims over UFG losses were far-fetched and were based on estimates and not reality.

Mentioning about comparable countries, KPMG study revealed that the maximum allowance permitted by regulators in other regions amounted to a max of 5pc and they suggested the same measure to be applied by OGRA in case of SNGPL and SSGC.

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  1. Apropos to the UFG report it is note worthy that in pre OGRA tariff regime there was no concept of UFG and it used to be treated as pass through item.

    The raison d’etre for creation of ogra was to rein in gas losses and to ensure guaranteed rate of return to the gas companies.

    The impugned study has revealed that ogra has miserably failed on both counts.
    Meaning thereby that the regulator is merely a calculator and nothing else.

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