The government is considering a price equalisation levy on wellhead gas to cross-subsidise protected residential and industrial consumers. This move aims to reduce the annual subsidy burden on the federal budget by Rs10-15 billion as part of broader petroleum sector reforms.
As per a news report, these reforms are a key component of the Integrated Energy Plan, led by the Prime Minister’s Office in collaboration with international lending agencies. The plan seeks to transform Pakistan’s inefficient gas companies into self-sustaining, profitable entities, ultimately paving the way for their privatisation.
The Petroleum Division has engaged around a dozen consulting firms, both local and international, for technical and financial advice. The division is also recruiting senior officials with expertise in various technical fields.
Petroleum Minister Dr. Musadik Malik is overseeing the development of a blended revenue requirement model for wellhead gas, pipeline gas, and imported regasified liquefied natural gas (RLNG). This model, based on the weighted average cost of gas (WACOG), is designed to meet the overall revenue requirements of the gas network.
The government has set an August 16 deadline for the recruitment of at least six technical analysts and consultants across various sectors. This process aims to create a wholesale gas market by separating the pipeline business from distribution companies, a model that has been challenging to implement in the power sector.
The initiative comes at a time when Pakistan faces mounting energy challenges, with a population projected to exceed 250 million by 2050 and per capita energy consumption remaining low compared to regional peers. If the country continues to grow at an average of 3.5% per year, energy demand is expected to nearly double by 2045.
Currently, about 82% of Pakistan’s energy needs are met through fossil fuels, the majority of which are imported, accounting for over 30% of the import bill. Domestic gas supply is expected to decline from around 3 billion cubic feet per day (bcfd) to about 1 bcfd by 2035, while total demand is projected to rise from 5 bcfd to 6.2 bcfd.
International interest, particularly from Middle Eastern companies, in Pakistan’s gas sector has raised hopes for successful restructuring and privatisation of Sui Southern Gas Company Limited (SSGCL) and Sui Northern Gas Pipelines Limited (SNGPL). The government aims to attract foreign investment and implement best practices through this restructuring process.
The Petroleum Division has also engaged consulting firms for specific sectoral input, including harmonisation of mineral laws, offshore incentives, and comprehensive gas demand studies. These firms will help review policies, address the root causes of circular debt, and attract exploration and production firms, particularly in offshore and shale gas regions.
