The Oil and Gas Regulatory Authority (OGRA) has initiated a review of the existing gas pricing framework, signalling a potential shift away from returns linked to fixed assets in line with ongoing gas market liberalisation, Business Recorder reported.Â
The regulator has begun consultations with stakeholders and scheduled a public hearing on Friday to gather views on revising the pricing formula. The review follows recommendations by consultancy firm KPMG, which was engaged to assess the current rate-of-return regime.
Since 2018, OGRA has allowed the two public gas utilities, Sui Northern Gas Pipelines Limited and Sui Southern Gas Company, to earn a market-based return calculated on the value of their average net fixed assets in operation each financial year.
In a statement, OGRA said that changing gas sector dynamics, including demand and supply imbalances, price volatility, and international benchmarking practices, had prompted a reassessment of the asset-based return model. The regulator said the review is being conducted through an independent consultant under defined terms of reference to ensure transparency and stakeholder participation.
Following receipt of the first draft report from KPMG, OGRA decided to initiate a public consultation process in line with legal requirements. The regulator said the exercise aims to evaluate whether the existing return-on-assets mechanism remains suitable in a liberalising gas market.
The gas utilities have opposed proposals to discontinue the guaranteed asset-based return formula and have urged the government to retain the current pricing regime.
The review comes as the gas transmission and distribution network continues to expand, contributing to higher consumer prices and rising utility earnings despite supply constraints. Data shows that operating costs at Sui Northern increased from Rs66 billion in FY2020 to Rs94 billion in FY2024, while its earnings rose from Rs19 billion to Rs38.9 billion over the same period, even as gas availability declined.
