LAHORE: Sui Northern Gas Pipelines Ltd (SNGPL) has asked the Oil and Gas Regulatory Authority (Ogra) to determine the cost of supply per metric million British thermal unit (mmBtu) of RLNG on actual throughput instead of the theoretical designed capacity (1,200mmcfd) of the pipeline dedicated for supply gas to Punjab.

“Actually the cost of supply of RLNG is being charged on the basis of the capacity of the pipeline which is 1,200 million standard cubic feet per day (mmcfd). But off and on, we receive less supply (1,000 or 1,050mmcfd) due to use of our gas (150 to 200mmcfd) by Sui Southern Gas Company Ltd (SSGCl) for supplying to K-Electric or any other means to meet its demand,” SNGPL managing director Ali J. Hamdani told Dawn on Saturday. “So our plea to calculated the cost of RLNG supply on the basis of actual supply and not the 1,200mmcfd designed capacity of the line,” he added.

“Ogra has understood our point well,” he added.

In its petition, the company while discussing the issue has also requested the authority to allow the impact of diversion cost of RLNG while determining the RNLG sale prices in accordance with the ECC policy guidelines issued on Oct 7, 2020.

The company states that the determination of RLNG cost of supply at the theoretical capacity of 1,200mmcfd is not supported by any relevant law or rules. And therefore, it needs to be calculated at actual throughput.

According to the petition, the company says that license condition no. 5.2 requires the authority to not disallow any cost component without fixing the benchmark.

Moreover, the reliance by the authority on Third Party Access (TPA) rules in case of sales of RLNG owned by the company. Furthermore, significant volumes are being withheld by SSGCL and sold to K-Electric by the same are not being accounted for by Ogra while determining the cost of supply.

“The RLNG diverted towards domestic sector also needs to be accounted for while calculating the cost of supply as the same has to be travelled through the RLNG infrastructure,” reads the SNGPL’s petition that further revealed that the SSGCL, on the direction of Ogra, is deducting the SNGPL’s RLNG volumes on account of Gas Internally Consumed (GIC) in their network while the same is not being taken into account in the end consumer price.

It further mentioned that the impact of GIC, while calculating the cost of supply, is being calculated on the basis of theoretical throughput of 1,200mmcfd as against the actual throughput that is a fundamental error and needs to be rectified. “Finance cost paid on running finance for the payment to LNG suppliers is also justified to be included in the cost of supply,” the company seeks.

It urges Ogra to allow the cost of volume of RLNG deducted by SSGC and markup on running finance borrowed by the company to keep the supply chain of RLNG intact.

“The ECC of the cabinet in its meeting held on May 17, 2018 has already dismantled the WACOG. Therefore, determining the UFG disallowance at the national WAGOG is unjustified and lacks legal cover. Moreover the Ministry of Energy in its letter of July 9, 2021 has also advised Ogra to consider the abeyance of WACOG while considering the revenue requirement of gas companies,” the company states in its petition.

On the other hand, the company has also asked the authority to review its decision of determining the UFG (Unaccounted for Gas) disallowance at the National Weighted Average Cost of Gas (WACOG) and calculate the same the company’s own cost of gas under the respective clause/condition in the license.

It also mentioned that the authority had determined the UFG disallowance at the National WACOG of Rs558.01 per MCF instead of the SNGPL’s own cost of gas of Rs481.94 / MCF, resulting in an additional disallowance of Rs426 million.

In its petition, the company projects a shortfall in revenue requirement at Rs92.617 billion including Rs163 million on account of the LPG air-mix project for the year, and sought an increase in its average prescribed price by Rs269.03 per mmBtu with effect from July 1, 2021. The petitioner has also included Rs219.892 million shortfall pertaining to previous years, thus seeking a total increase in the average prescribed price by Rs907.75 per mmBtu from July 1, 2021.

Published in Dawn, December 12th, 2021