Moratorium on new gas connections officially lifted

ISLAMABAD: The government has notified a relaxation of the moratorium on new gas connections for industrial, commercial and captive consumers and directed the gas utilities to implement it with immediate effect.

In an order issued recen­tly, the Ministry of Pet­roleum and Natural Resou­rces informed the managing directors of the Sui Sout­hern Gas Company Limited (SSGCL) and Sui Northern Gas Pipelines Limited (SNGPL) about the cabinet’s decision of April 12.

The decision relaxed the “moratorium on new gas connections for industrial, commercial, captive consumers, the load enhancement of existing such consumers and new housing societies and colonies,” enabling the Ministry of Petroleum to allocate re-gasified liquefied natural gas (RLNG) to prospective consumers on an “as & when available basis” on SSGCL and SNGPL’s transmission and distribution networks, respectively.

But such connections will be charged more than the highest rates currently being charged from gas consumers, since the government wants to create a new class of customers that can pay a higher premium in exchange for uninterrupted gas supply.

New consumers can opt to pay more in exchange for uninterrupted RLNG supply
The order said: “The cost of laying [a] dedicated line for supply of RLNG from [the] nearest network pipeline will be borne by the RLNG consumer”. The two utilities have been asked to process applications from consumers in the specified categories for new connections or enhancement of gas load.

This is in addition to around 100 gas expansion schemes for domestic consumers already approved by the prime minister on the recommendations of the politicians, and subsequently endorsed by the cabinet under direct funding from the federal government worth Rs37 billion. The moratorium was imposed in 2011 due to a shortage was purportedly removed in view of an improvement in gas supplies due to the injection of imported RLNG into the system.

Earlier, the Cabinet Committee on Energy (CCOE) led by the prime minister, had ended the moratorium on fresh bulk gas connections for domestic, commercial and industrial consumers.

The ministry had pleaded that such a long moratorium was having a lasting negative impact on industrial expansion and could not be maintained forever. It claimed that there were a lot of housing colonies and plazas coming up that were willing to pay the higher rates for bulk purchases.

The government is already importing about 400 million cubic feet per day (mmcfd) of LNG, with a view to scale up to 600mmcfd in a few years, followed by another 600mmcfd of LNG that is expected to flow in after the completion of a second LNG terminal in a few months. Therefore, there was a need to create new class of consumers that could afford the higher landing cost of imported RLNG.

Such consumers will be given an option to pay higher rates, to be approved by the Oil and Gas Regulatory Authority (Ogra), for RLNG to secure uninterrupted gas supply. This would mean that large domestic consumers and those ready to purchase in bulk (housing colonies and plazas) would be charged higher than the highest rates currently charged to existing domestic natural gas consumers.

RLNG is currently being provided to fertiliser, industrial, electricity and transport sectors because of limited imports, but RLNG users would increase when the government ramps up imports.

The government’s idea is to extend RLNG supplies to all those who can afford it at a later stage by mixing the imported gas with the domestic product through the Weighted Average Cost of Gas (WACOG) to protect lower and middle income consumers from a major price hike. The move aims to improve cash flows of gas utilities and gives a policy signal to rich consumers to opt for alternative fuels if they cannot control their consumption. “They should not have unlimited access to a scarce resource at subsidised rates,” an official explained.

At present, domestic consumers using more than 300 cubic metres of natural gas per month are charged at the rate of about Rs700 per mmbtu compared to less than Rs280 per mmbtu being charged to consumers using less than 300 cubic metres a month.

In contrast, RLNG is currently priced at about Rs1,000 or above per mmbtu. That would mean the price for large domestic consumers could be 40pc higher for the purpose of price parity with CNG, industry, fertiliser and power sectors.

Source: Dawn