Govt decides on no new gas development scheme

ISLAMABAD: The government has decided that no new gas development scheme will be approved by any forum and no new gas connection on indigenous gas will be provided from now onwards, it was reliably learnt on Tuesday.

In addition to this, any approved schemes where no progress has been made will be shelved. As the country faces an acute shortage of gas in both domestic and commercial connections, a wild-dash is being made to try and solve the problem of gas load-shedding and low-pressure. 

What are gas development schemes? 

Gas development schemes are usually announced by different politicians in their constituencies or by the government for areas in which there are not reliable gas connections. Since local Sui gas is cheaper, most people want connections to this indigenous gas instead of the more expensive and imported alternative — RLNG. 

However, since there is not enough natural indigenous gas in the country, consumers that already have connections to this gas are facing shortages in the winter months when it is needed most. Back in December, a report of the Intelligence Bureau had pointed out that SNGPL failed to supply gas to consumers, particularly home consumers, during mealtimes in certain areas of Punjab, Khyber Pakhtunkhwa, and Islamabad. According to experts, these gas development schemes often cause issues for the two Sui companies in meeting their targets and getting net returns. 

However, the decision means bad news for people in far-flung areas hoping to get natural gas connections. Back in September last year, a report had indicated that continuous ban on the provision of new gas connections is not only irking the consumers but also increasing the backlog of the Sui Northern Gas Pipelines Limited (SNGPL).

Details of the decision 

In order to avoid loss of asset laid to allow sui companies to capitalise the laid asset after its completion, incomplete gas development schemes where work has already been initiated may be completed while remaining within the available funds released by the government. However, no new connection may be provided under these schemes upon completion. 

However, the gas schemes under the policy of 5-kilometre radius of gas fields will continue subject to availability of funding from government while companies would consider the viability of such schemes based on depletion profile of producing fields, said sources.

They added that the government has taken this strict decision apparently due to scarcity of local natural gas and the present backlog of gas development schemes. “This government decision would also affect those gas development schemes which were approved by the former Pakistan Tehreek-i-Insaf (PTI) government”, they said. 

It is also learnt that since financial year (FY) 2015-16, the consumer gas prices were not adequately revised to be consistent with revenue requirements determined by OGRA and this resulted in accumulation of revenue shortfall/tariff differential amounting to Rs 547 billion, as of March 2022. The sui companies were, therefore, neither able to recover their investment, earn any return on that investment nor have sufficient gas to provide to the new and potential consumers, said sources.

Sources also informed that the government has decided no new demand notice would be issued by sui companies against the pending applications. And, if any applicant wishes to get refund of his/her gas connection fees/urgent fee against pending application, the same would be refunded by sui companies without any delay along with interest, if the company has earned an interest on such deposit of amounts. Similarly, no new domestic/bulk domestic/special commercial connection on depleting indigenous gas may be provided. 

Likewise, all pending domestic / bulk domestic applications/new housing schemes where payments have been made may be considered only on full Re-gasified Natural Gas (RLNG) price and in phased manner. Furthermore, consumers/housing schemes which opted for RLNG connections and supply were accordingly commissioned as per policy approved by government in April, 2017 must not be allowed to switch to indigenous gas supply or indigenous gas tariff under any circumstances.

The Cabinet Committee on Energy (CCoE) has taken the decision that no new gas development scheme will be approved by any forum and no new, they added. Sources said that pending gas development schemes would entail additional gas load of 172 Million Cubic Feet per Day (MMCFD) and pending gas connections would entail an additional gas load of 92 MMCFD in winters.

“Considering depletion of local natural gas, replacement of same by RLNG and present distortion in domestic consumer pricing, it did not appear viable to develop new schemes, and provide new connections or to provide RLNG to domestic consumers unless pricing structure was brought to level of full cost recovery or alternately the government funds the differential of tariff as subsidy,” they said.

They added that in addition to gas development schemes, sui companies have so far been providing domestic connections based on annual targets provided by OGRA.

It is relevant to note that the Oil and Gas Regulatory Authority (OGRA) through its two separate decisions on Estimated Revenue Requirement for 2021-2022 and FY 2022-23, had earlier principally allowed Sui Northern Gas Pipelines Limited (SNGPL) to undertake ongoing schemes while assigning priority to all such schemes which were more than 50 percent complete, starting from year 2011, subject to following:

1.   SNGPL shall ensure that addition of new gas connections/development schemes shall not further affect the security and continuity of gas supplies to existing consumers and arrange sufficient gas supplies for new connections.
2.   SNGPL shall ensure that addition of new gas connections/development schemes shall have no adverse and financial impact on existing consumers.

It is pertinent to mention here that SNGPL and SSGCL are engaged in the transmission and distribution/sale of natural gas under licence from OGRA. In view of the socio-economic development in the country and the government’s policy, gas development schemes were initiated for supply of gas/extension of network to economically under-developed areas. For the period between 2018 to 2022, the Steering Committee of Sustainable Development Goals Achievement Program (SAP) and the sub-committee of the SAP approved a number of gas development schemes along with release of funds.