Ogra strongly opposes proposed LPG air mix projects

ISLAMABAD - Oil and Gas Regulatory Authority (Ogra), once again raising serious reservations on the proposed multi-million dollars LPG air mix projects, has put forwarded half a dozen objections in this regard, sources said on Tuesday.Further, available Ogra’s letter obtained from the Planning Commission on the revised proposed amendments disclosed to TheNation that Ogra can not determine consumer prices as its role is restricted to the determination of revenue requirements of natural gas utilities. Similarly, tariff for LPG air mix cannot be determined as well as notified by Ogra under the relevant provisions of the Ordinance. Also, LPG is not a regulated activity for which Ogra can execute the tariff function/determination price.“The cost of LPG is five times high as that of natural gas. Ogra has already been allowing LPG air mix projects undertaken by Sui Southern Gas Company Limited (SSGC) pursuant to federal government advice, which is severely hurting the natural gas consumers. LPG air mix projects are capital-intensive projects. Ogra, in view of huge disparity between natural gas and LPG air mix price, again reiterated that all LPG air mix projects shall not be included as permissible expenditure in the revenue requirements of the respective gas companies, since the same will translate into humungous burden on existing natural gas consumers and sharp increase in gas price. The same should be treated as standalone project, only focused on remote areas where the natural gas system does not exist,” Ogra letter reads, adding, “Gas utilities under the existing tariff regime are entitled to a guaranteed rate of return on assets. The inclusion of capital and revenue requirement will result in skyrocketing prices. Ogra has further said that it determines the weighted average cost of gas (WACOG) twice a year as per the time stipulated in the Ordinance. The determination of cost of LPG as well as WACOG on monthly basis is against Ogra’s law and cannot be done.Similarly, the regulatory authority in its comments on proposed amendments in LPG air mix projects has further said the proposal of mixing LPG air mix in natural gas and including the cost of the same in the weighted average cost of gas is not supported and inclusion of cost of LPG air mix will not only result in sharp increases in cost of gas but will also create further anomalies in the system through introduction of yet another substantial cross subsidy. Notwithstanding the above, Ministry of Petroleum and Natural Resources may advise average six monthly LPG prices to Ogra for inclusion in WACOG/revenue requirement, subject to policy advice from the federal government that the same shall be treated equivalent to wellhead price, which fall exclusively in the domain of the ministry, being the upstream regulator. The MP&NR will however be responsible for LPG air mix pricing being upstream regulator.It is to be noted here that despite serious reservations earlier shown by the regulatory authority, babus in Petroleum Ministry, eyeing pie in the proposed LPG air mix projects, are all out to dole out special favours to the LPG suppliers resultantly there will b sharp increase in for all categories of gas consumers. In accordance with proposed projects, LPG would be injected with LPG air mix plant in the pipelines of SSGC and SNGPL. Further, with the injection of proposed 150-mmcfd gas, a hike of 25.60 per cent in current tariff will be witnessed in country as gas consumers will bear the brunt of inclusion of additional tariff and all expenditures of the proposed LPG air mix plant project. Sources were of the view that this project will open new avenues of kickbacks and gas companies will earn heavily at the cost of consumers.“Though the ECC has once again deferred the summary of proposed LPG air mix project sought by Ministry of Petroleum and Natural Resources which found desperate to initiate this world’s most expensive project despite the fact that a sub-committee of the ECC has already given its approval to the projects which in result will cause a nominal reduction in worsening gas crisis of the country”, sources said, adding, that govt gurus hands in glove with an influential lobby in LPG sector are desperately striving hard to promote LPG business in the country by getting the nod of ECC of the cabinet though this commodity is very much expensive viewing its ever increasing sky rocketing prices all over the world.Official sources had earlier informed that Ogra has seriously opposed the proposed LPG air mix projects on the grounds that though this project will be a lucrative opportunity for the gas companies to get enhanced their assets, yet all consumers will have to pay additional cost of this very project. “If the entire system is handed over to gas utilities, they are bound to opt for expensive infrastructure development and gold platting of assets, since they are operating on return on asset based regime,” Ogra letter says.

ePaper - Nawaiwaqt