ISLAMABAD: Backed by the petroleum ministry, the three government-owned energy companies have sought a cumulative 28 per cent increase in the price of imported regasified liquefied natural gas (RLNG) approved by the Oil and Gas Regulatory Authority (Ogra) early this month.

The Pakistan State Oil (PSO), the Sui Southern Gas Company (SSGC) and Sui Northern Gas Pipelines Limited (SNGPL) have written to the regulator that the RLNG price approved at $8.64 per unit on Oct 7 did not offer them substantial incentive to be in RLNG supply and it should be increased to about $11.20 per unit.

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The PSO has also asked Ogra to approve the price for four RLNG ships imported without tendering process based on a letter of the petroleum ministry to allow recovery of Rs11 billion spent on these shipments.

A senior Ogra official, however, said the government had itself tied its hands to allow any upward revision in RLNG price by declaring LNG as a petroleum product, ins­tead of gas, by amending the schedule of Petroleum Levy Ordinance of 1961. The law did not allow a review of price once approved by Ogra, he said.

Secondly, Ogra pointed out that a simple letter from the government for four ships of RLNG imported without tender could not empower the regulator to give a price for these ships.

He said that about seven LNG ships imported through tender had been approved for pricing but tendering requirement could only be bypassed if a summary prepared by the board of directors of Public Procurement Authority, led by secretary finance, is approved by the prime minister.

The officials of SNGPL and SSGCL confirmed they understood the petroleum levy law did not allow price review as was the case with prescribed gas prices, but they had nevertheless filed review applications on the desire of the petroleum ministry and board of directors.

The PSO also asked Ogra to increase its margin on RLNG import to 4pc instead of 1.82pc in line with Rs2.35 per litre margin on diesel and petrol that now worked out at 5.8pc of the sale price.

The Ogra official noted that PSO had forgotten to report that the Rs2.35 per litre margin on diesel and petrol was fixed when their prices were over Rs100 per litre (less than 3pc) and involved a lot of other incidentals in providing petroleum products to every nook and cranny of the country and not only until import stage as was the case with RLNG.

The PSO has also opposed public hearing into the final price determination of RLNG, saying its price be fixed on the pattern of other petroleum products. It said the PSO had already paid gas infrastructure cess imposed by the Sindh government which should be allowed in the RLNG price.

The oil company said the Ogra had allowed the margin as the sum of estimated cost on taxes and the estimated operating cost on LNG without incorporating any adequate return. “PSO being a commercial entity is also responsible to provide adequate return to its shareholders as they normally expect a reasonable return on new ventures initiated by the company.”

Therefore, it wanted Ogra to enable the PSO to pass on reasonable return on the LNG venture to its shareholders in line with the return on other business lines of the company.

The PSO went the extra mile to ask Ogra that the government decision required the regulatory authority to determine the RLNG price and PSO will notify the RLNG price. It asked the Ogra to give “a detailed standard operating procedure (SOP) wherein the roles of all stakeholders including Ogra, PSO and gas companies are clearly defined along with identification of the requisite data to be provided by each stakeholder and relevant timelines”.

The two gas companies have also demanded $0.5 per unit of administrative charges each, 1.5pc retainage, service charges and distribution losses in the final RLNG price.

Published in Dawn, October 31st, 2015

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