ISLAMABAD: The government on Monday decided in principle to restrict all public sector exploration and development companies to sell liquefied petroleum gas (LPG), extracted from oil and gas fields, only to Sui gas companies.

This decision was taken to stabilise LPG’s prices and also to promote and commercialise LPG, a non-conventional fuel, in the transport sector to minimise the wide-scale consumption of CNG, which is draining the country’s national gas reserves.

This is part of the new LPG (Production & Distribution) Policy 2012, which is finalised by the ministry of petroleum and natural resources, and due for approval by the Economic Coordination Committee (ECC) of the cabinet in its forthcoming meeting.

According to the policy, CNG stations and petrol pumps would be allowed to set up LPG vehicle refuelling stations and purchase LPG from any licensed company from a local source or through import.

Although the new policy seeks to continue with the deregulation policy in its pricing, the Oil and Gas Regulatory Authority (Ogra) has been given wide-ranging powers to determine the reasonability of LPG prices and LPG quantities for import, along with issuance of licenses to LPG marketing companies and dealers, according to a copy available with Dawn.

The public sector exploration and production companies such as OGDCL and PPL can directly or through other companies set up LPG extraction facilities at gas fields where it can be used commercially and sold to Sui companies.

This comes after Sui Southern Gas Company purchased a private firm — Progas — and renamed it as SSGC-LPG Private Limited on government’s support to compete with private LPG companies.

However if the Sui companies are unable to buy LPG or there is a surplus of LPG availabe, then E&P companies are allow to supply LPG private sector LPG marketing companies, with the terms and conditions to be settled by the two sides.

Private sector E&P companies that have the potential to produce LPG would be required to submit details to the DG Petroleum Concession, as part of the field development plan, and their intention to exercise their right for extraction of LPG.

Failure of private E&P companies to comply with these standards would give the government the right to get LPG extracted through competitive bidding.

OGRA will also issue provincial licenses for an initial period of one year to technically and financially strong LPG marketing companies for construction of work on the basis of a commitment to supply LPG from a local or international source.

OGRA can revoke the company’s license if it fails to supply a minimum of 10 tons per day for three consecutive years.

In the program, the provisional license holders will have to ensure that adequate storage, cylinders and logistics infrastructures are constructed within this timeframe and are in line with the marketing plan of the company.

On completion and approved by OGRA, the provisional license will be converted to a marketing license for a period of fifteen years, subject to firm LPG supply arrangements and meeting applicable safety rules.

OGRA will also issue licences for production, extraction, LPG Air Mix plants, LPG storage and filling plants, and LPG refuelling stations for automotives, subject to clearance from Department of Explosives. On non-compliance, the licenses shall stand cancelled.

Decanting of LPG from cylinder to cylinder and cross filling of other LPG marketing companies’ cylinder would remain prohibited except with the prior approval of OGRA under hospitality arrangement. Violation under this rule would lead to cancellation of marketing licences.

OGRA will also publish a list of authorized manufacturers for all LPG equipment including LPG refuelling stations, conversion kits, fuel tanks, cylinders, storage tanks, which will be approved and certified by Hydrocarbon Development Institute of Pakistan.

Although the LPG pricing will remain deregulated, OGRA will monitor its reasonability.

The Government will charge a petroleum levy to local LPG producers as provided in Petroleum Levy (Petroleum Products) Ordinance, 1961.

To discourage cartels resulting in high consumer prices, OGRA will determine the quantity of LPG to be imported in order to meet the gap between demand and supply.

This quantity will then be imported by public sector companies for supply to LPG marketing companies. However, private companies would also be free to import LPG in line with their own marketing requirements.

OGRA shall obtain list of all existing LPG Distributors from LPG marketing companies and register them within 90 days of the date of issuance of the policy and will also submit a quarterly report on implementation of the new policy to the federal government.