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Business Recorder
2 days ago
- Business
- Business Recorder
Minister orders Ogra to review gas firms' revenue needs
ISLAMABAD: Minister for Petroleum Division, Ali Pervaiz Malik, has directed the Oil and Gas Regulatory Authority (Ogra) to review every component of the revenue requirements of the Sui gas companies. The aim is to reduce gas prices and address the growing circular debt issue, sources told Business Recorder. The circular debt in the petroleum sector has reached approximately Rs 2.8 trillion. The government, under Prime Minister Shehbaz Sharif is working to resolve this issue in consultation with the International Monetary Fund (IMF). An initial plan has been drafted to mitigate the gas circular debt without placing an additional burden on consumers. To tackle core challenges in the gas sector — including circular debt, LNG tariffs, unaccounted-for gas (UFG) losses, and the rising share of LNG in the national gas mix—the government has established four specialized panels. Consumers lack protection: Ogra failing to act against gas companies: PAC report The petroleum minister, who also chairs the main committee, is overseeing the sub-committees tasked with preparing final recommendations for the highest level of government. In a recent meeting, a senior Joint Secretary from the Cabinet Division read out the composition and Terms of Reference (ToRs) of the four sub-committees. Dr Fakhray Alam Irfan, Secretary of the Power Division and head of the sub-committee on LNG demand synchronization, reported that he chaired a meeting on July 21, 2025. The meeting included representatives from PSO, SNGPL, and CPPA. The Power Division presented a report on the forecasting and management of RLNG demand in the power sector. Dr Irfan pointed out that one of the main issues discussed was the parking of NPD (Net Present Deficit) claims under LNG contracts due to reduced power offtake and the must-run status of RLNG-based power plants. He acknowledged that while the power sector has mostly consumed gas according to firm demand, occasional shortfalls in RLNG lifting occur due to fluctuating power demand caused by weather, generation mix, and system constraints. He added that the pipeline storage limitations raised by the Petroleum Division are valid. To address this, he stressed the need for accurate demand forecasting and improved coordination between NPCC and SNGPL, except in unforeseen circumstances. He also recommended that the Finance Division be consulted on the NPD issue. It was noted that the sub-committee on circular debt mitigation has not yet convened. However, the Additional Secretary (Policy) provided an update on the sub-committee for LNG tariff rationalisation, which met on July 19, 2025. Representatives from all companies across the LNG/RLNG supply chain participated. The meeting covered detailed discussions on various RLNG pricing components. Suggestions were made for reducing or revisiting charges such as terminal fees by PQA, customs duty, FED, Sindh Cess, and company/importer margins. The sub-committee is currently reviewing these cost elements, and formal recommendations will follow. Meanwhile, Ogra Chairman, Masroor Khan who leads the sub-committee on domestic gas tariff efficiency and transparency reported that their meeting on July 21, 2025, was attended by representatives from the Sui companies, KPMG, and the Petroleum Division. The focus was on enhancing operational efficiency and reducing UFG. He noted that the companies are making progress in lowering UFG levels in accordance with benchmarks set by the Ogra. He also provided an update on efforts to review the Return on Asset (ROA) formula for Sui companies. Although the Ogra has made several attempts to hire a consultant, the process has so far been unsuccessful. Recently, the Ogra issued an Expression of Interest (EoI) to potential consultancy firms, and the selection process is expected to conclude soon. Minister Ali Pervaiz Malik emphasized the Ogra must complete its review of each component of the Sui companies' revenue requirements within the next few weeks. Copyright Business Recorder, 2025
Business Recorder
3 days ago
- Business
- Business Recorder
Working in silos will not do
EDITORIAL: The energy sector's complex web is becoming increasingly difficult to manage as authorities continue to attempt to solve issues in silos, an approach that only complicates the problems. Currently, the Energy Task Force (ETF) and the Power and Petroleum Divisions are developing their own solutions without considering their interconnectivity and interdependence. With the power sector's push, backed by the IMF, captive power plants are being subjected to hefty levies on gas consumption. The objective is to transition industrial consumers to the grid, which is being partially achieved. The logical consequence should have been a higher off-take of RLNG by the power sector, but that is not happening, leaving expensive gas unused, which contributes to the circular debt of gas, excessive pressure on the pipelines, and lower off-take of cheap domestic gas. Reportedly, when the Petroleum Division urged the Power Division to increase its intake of RLNG, the minister replied that it would not commit a grave sin (gunnah-e-kabeera) by violating the economic merit order (EMO). The minister was behaving like a principled man, but such discipline was regrettably found lacking when the levy imposed (at peak rates for the entire day) was even higher than what the IMF had prescribed. The Discos (working under the Power Division) are being blamed for Rs 240 billion of overbilling to poor consumers, who are already paying for the inefficiencies of the government. The minister is silent on this issue that is beginning to become increasingly conspicuous. This selective amnesia does not stop here. The power minister is pushing his petroleum counterpart to review RLNG buying contracts with Qatar, asking to emulate what the Power Division has done with the IPPs. How naïve is it to even suggest this remedy. First, it would be tantamount to openly disregarding the sanctity of sovereign contracts. Second, it tends to advocate and normalise coercive actions that were employed against local IPP owners, a stance that has severely undermined investor confidence. Third, it demands breaking contractual commitments with international investors, despite the Power Division and ETF's own failures — even they could not persuade Chinese IPPs to waive the late payment interest (LPI) on outstanding dues, casting uncertainty over the Rs 1.3 trillion circular debt reduction plan. And the cherry on the top is that EMO that is being termed 'holy' while others are being advised to violate (or revise) sovereign contracts. Not only is buying RLNG from Qatar a necessity, but running RLNG plants to a specific limit is also necessary. It is a problem of double standards and a lack of understanding of the core issues. What the government is required to focus on is why the power demand is falling, as the off-take from the grid is still 11 percent shy of its peak in FY22. The need is to address the issue of solar net metering — where rates should be revised by adjusting solar pricing for new net metering contracts (with no change in existing rates) — has been identified, yet the necessary action has not been taken. The power ministry fears a public backlash over solar net metering, while the public is being cheated by entities under its domain by engaging in overbilling at the same time. Suffice it to say that the direly needed clarity of thought and objectivity in the solutions being proposed are simply missing. Copyright Business Recorder, 2025
Business Recorder
5 days ago
- Business
- Business Recorder
Export-oriented industry rates: MoC opposes gas/RLNG supply to Ghani Glass
ISLAMABAD: Ministry of Commerce (MoC) has opposed provision of gas/RLNG to M/s Ghani Glass Limited as per rates made available to the export-oriented industry. According to the details, in 2019, M/s Ghani Glass Ltd. filed a Writ Petition in the Lahore High Court and prayed that the concessionary gas/RLNG tariff-fixed at Rs. 600 per MMBTU granted to the zero-rated/export- oriented sectors, may be extended to the Petitioner, as well. Petroleum Division, Oil and Gas Regulatory Authority (OGRA), Sui Northern Gas Pipeline Limited (SNGPL), and Federal Board of Revenue were the original respondents in the Writ Petition (Annex-I). Ministry of Finance and Ministry of Commerce were not impleaded as parties, in this case, until April 07, 2025. The Lahore High Court, in its judgment of April 10, 2025, directed: (i) Ministry of Finance in coordination with the Ministry of Commerce and other relevant stakeholders to, within 90 days, place the case of M/s Ghani Glass Ltd. before the ECC of the Cabinet to develop a uniform policy ensuring that only export-oriented industry receive tariff concession rather than making sector-based classification that allow non-exporting industry to benefit unfairly;(ii) in case of placement of the Case, the ECC was directed to consider within 60 days, the request of the petitioner for grant of concessional tariff in respect of price of Sui Gas/RLNG with specific reference to the point of discrimination excluding glass from the export-oriented sectors;(iii) the relevant authority was also directed to look into charging concessionary tariff from the petitioner from the date of filing of the case (i.e., 2019) till the period the benefit was extended to five zero-rated/export-oriented sectors ; and (iv) ECC was directed to take into consideration the potential of glass industry to further increase export abroad to fetch maximum foreign exchange. Furthermore, the said forum was also tasked to determine whether it is feasible to charge high prices to any export-oriented industry as compared to the price prevalent in other countries. According to Commerce Ministry, the Federal Board of Revenue in an SRO 1125(1)/2011, granted zero-rated sales tax status to the five key sectors: textiles (including jute), carpets, leather, sports goods, and surgical instruments. In 2018, the Petroleum Division extended concessionary tariff on RLNG at PKR 600/MMBTU to the exporters of the same five zero-rated sectors. Following the withdrawal of SRO 1125(1)/2011 through the Finance Bill 2019, an administrative gap emerged regarding the continuation of concessionary gas tariffs. Ministry of Commerce, therefore, declared the erstwhile zero-rated sectors as 'Export-Oriented Sectors' through an OM of December 13, 2019. Accordingly, concessionary gas tariffs continued till 2023 and were discontinued afterwards. Commerce Ministry further stated that concessionary energy tariffs which were being granted to the five export-oriented sectors have been discontinued and are no longer available to any sector. Tariff concessions were granted to those sectors whose share in Pakistan's total exports were significant in 2011, while share of the glass sector with an annual export $ 15.9 million was negligible. Ministry of Commerce on the advice of Ministry of Law & Justice, filed aCivil Petition for Leave to Appeal (CPLA) on June 12, 2025 in the Supreme Courtof Pakistan and has contested the judgment of Lahore High Court. Commerce Ministry was of the view, that the claim made by M/s Ghani Glass Limited for grant of tariff concessions on gas/RNLG is untenable and may not be entertained. Copyright Business Recorder, 2025
Business Recorder
6 days ago
- Business
- Business Recorder
Forced curtailments, low demand drag down Pakistan's oil & gas output in FY25
Oil and gas production in Pakistan declined significantly by 12% and 7% year-on-year (YoY), respectively, in FY25, as output from key fields remained under pressure due to forced curtailments and lower gas demand. 'The contraction in hydrocarbon output comes amid forced curtailments at Nashpa, TAL and other blocks due to lower gas demand,' said Arif Habib Limited (AHL), in its report released on Thursday. As per the report, major oil fields such as Nashpa, Makori East, Pasakhi, Adhi, Taj, Mardenkhel, Maramzai, Rajian, and Umar experienced a drop in production during FY25. AHL E&P Universe Oil Production (BOPD) FY25 FY24 YoY OGDC 30,961 33,027 -6% PPL 10,221 11,325 -10% POL 4,444 4,727 -6% MARI 1,271 1,193 7% Gas Production (MMCFD) OGDC 652 715 -9% PPL 480 532 -10% POL 53 62 -14% MARI 818 799 2% In terms of gas production, key fields including Mari, Qadirpur, Sui, Sharf, Kandhkot, Naimat West, and Sutiari Deep registered a decline. On a quarterly basis, oil and gas production in Pakistan decreased by 15% and 10% YoY, respectively, in 4QFY25. Pakistan Petroleum Limited commissions new exploratory well in Sujawal Speaking to Business Recorder, Iqbal Jawaid, Senior Investment Analyst at AHL, said that the decline in hydrocarbon production this fiscal year 'was primarily due to weak gas demand from the consumers'. 'The problem is that RLNG gas is available in the system, and as per our agreement with Qatar, the government is bound to purchase it. So, what is within the government's control? Domestic gas production… hence, local production was curtailed in FY25,' he said. The analyst was of the view that due to gas curtailment oil production was also curtailed, as both are extracted together. Commenting on the economic impact, Jawaid noted that with lower oil production in Pakistan, our reliance on imported crude further increases. 'The only way out of all this is renegotiating the RLNG deal in March 2026,' he said. The senior analyst explained that under the original agreement signed in 2016, the terms can be renegotiated after 10 years. 'At that point, the government can seek a reduction in RLNG rates and volumes. If this happens, domestic gas and oil volumes are likely to increase, and gas prices — influenced by the lower RLNG rate — will also decline,' he said. Meanwhile, as per the report, a total of 23 exploratory wells and 30 appraisal/development wells were spudded during FY25, against a target of 27 exploratory wells and 40 appraisal/development wells. 'The exploration efforts of Pakistani E&P companies in the listed space yielded 21 discoveries during FY25, with a cumulative discovery size of approximately ~3,187 bopd of condensate and ~303 mmcfd of gas,' AHL said.
Business Recorder
23-07-2025
- Business
- Business Recorder
PD in a quandary over less RLNG off-take by power plants
ISLAMABAD: Petroleum Division is still in a quandary over less off-take of Regasified Liquefied Natural Gas (RLNG) by the power plants, which is resulting in rapid saturation of Sui Northern Gas Company Limited (SNGPL) system, well informed sources told Business Recorder. 'SNGPL is continuously reporting reduced RLNG consumption by the power sector against its committed demand of 600 MMCFD for July 2025,' said Deputy Director (Tech Gas) Salahuddin Khan. M/s SNGPL in a letter of July 15, 2025 has reiterated that consumption remained 327 MMFCD on July 16, 2025, with a monthly average of 501-MMFCD, leading to surplus gas accumulation that has pushed system pack beyond critical levels. Short on commitment with SNGPL: Power sector uses 28pc less RLNG SNGPL further highlighted that power consumption on July 17, 2025 was recorded at 300 MMCFD, leading to continued gas accumulation in the system, which is unsustainable. 'If RLNG off-take is not immediately increased and maintained as per demand, the resulting high pressures may disrupt re-gasification at terminals, risking cargo discharge delays and potential financial losses in the form of demurrages and take-or-pay applicability. Alternatively, SNGPL shall be constrained to further curtail supplies from local gas fields,' said Directorate General (Gas) Petroleum Division. According to sources, Power Division has been requested to advise the concerned quarters to increase RLNG off-take as per demand for the month of July 2025 with re-coupment of previously unconsumed volumes to ensure smooth operation of the SNGPL system and to avoid any untoward situation in the national interest. On July 10, 2025, responding to the comments of Minister for Petroleum and Natural Resources Ali Pervaiz Malik on underutilisation of RLNG by the IPPs, Minister for Power, Sardar Awais Ahmad Khan Leghari staunchly defended the Economic Merit Order (EMO), declaring that any attempt to alter it would be a 'grave sin' (Gunnah Kabeera). He urged the Petroleum Division to review Liquefied Natural Gas (LNG) contracts—if necessary—just as the Power Division had done with Independent Power Producers. 'Ali Pervaiz Malik is a close friend, and his concerns are valid if the contracts are flawed,' Leghari said. 'Power plants operate under the EMO, which prioritises electricity generation from the cheapest sources. If RLNG plants don't qualify under EMO, they simply can't be operated,' he further explained. National Electric Power Regulatory Authority (Nepra) has been sharing violations of EMO by the System Operator during the public hearings on FCAs, on the basis of which billions of rupees of NGC (former NTDC) were withheld. However, this exercise has now almost been stopped without any reason. Nepra has directed that the System Operator and NGC must present a comprehensive update that includes covering outages of economic power plants, the resulting financial impact, and reliance on out-of-merit generation. The update should also include the status of identified system constraint, progress made, revised completion timelines and associated financial implications. At a recent meeting on gas issues, the representative of Power Division commented that challenges need to be met and disruptions need to be looked into. The Chair responded that the tactical issues would be discussed later and, presently, the focus needs to be on sustainability of the gas sector and how LNG over supply/ less off-take is affecting it. Secretary Petroleum framed the key issues to be addressed by the Committee, namely rationalisation of gas tariffs (for both indigenous and imported gas), synchronisation of LNG demand with the power sector along with resolution of circular debt within the gas sector. Copyright Business Recorder, 2025
