The novel method under intense consideration of the government to overcome natural gas shortages in the power and industrial sector, LPG Air Mix, if implemented will immediately hike the consumer gas tariff by 27 percent, says the summary available with the Pakistan Today presented before the Economic Coordination Committee on July 3.
The summary presented different volume scenarios, from 10 mmcfd to 150 mmcfd for the LPG Air Mix. The most debated volume was 150 mmcfd, which if implemented would increase the gas prices by 26.95 percent or Rs 83.26 per mmBTU based upon the current weighted average cost of gas (WACOG) of Rs 392.21 per mmBTU. The calculation was based upon the Saudi CP of $ 861 per ton.
The summary proposes that the supply of LPG for the projects will be ensured through open bidding, while Oil and Gas Regulatory Authority (OGRA) would be determining cost of LPG as well as WACOG on monthly basis. The two gas utility companies will work out the modalities for injection of LPG air mix to selected industrial and power consumers.
It proposes that the cost of LPG air mix in WACOG will be determined by OGRA in estimated revenue requirement (ERR) of the gas companies. Petroleum Ministry is of the opinion that minimum impact will be passed to domestic and commercial consumers and maximum impact to beneficiaries industrial and power sector.
An official source said Chairman OGRA Saeed Ahmad Khan opposed the Ministry of Petroleum policy saying that it would result in over burdening the existing consumers. This invited ire of Petroleum Minister Dr. Asim Hussain who termed his argument as lies. He said OGRA Chairman was going beyond his mandate by intervening in the policy issues which were only the prerogative of the ministry.
The minister said that the regulator could only implement, monitor and regulate the policy finalised by the government and could not express any views on the policy which was beyond its mandate. However, the source said the Finance Minister had to intervene and asked the petroleum minister to at least allow the ECC members to have a listen of the other point of view.
Chairman OGRA said the weighted average cost of gas formula proposed by the ministry will be significantly increasing gas prices from the current level of $ 4 mmBTU considering the imported cost of $ 9 mmBTU.
After a detailed discussion the ECC approved import of LPG equivalent to 250 tons with a cost computed on the basis of weighted average cost of gas. However, key decision of procurement methodology and tendering will be brought to ECC through a detailed presentation in the next meeting. ECC also requested law ministry to look further into the matter regarding price determination of LPG on monthly or six monthly basis.
The summary says the guidelines for LPG air mix will be applicable to distribution projects of piped LNG and CNG by the sui companies to retail consumers. All expenditure incurred in installing, maintaining and operating these projects including cost of gas shall be included as permissible expenditure in the revenue requirements of the respective gas companies. However, the gas utilities will ensure prudency in expenditure and ensure ring fencing of all capital and revenue expenditures.
