Minister orders Ogra to review gas firms' revenue needs

Business Recorder

2 days ago

ISLAMABAD: Minister for Petroleum Division, Ali Pervaiz Malik, has directed the Oil and Gas Regulatory Authority (Ogra) to review every component of the revenue requirements of the Sui gas companies. The aim is to reduce gas prices and address the growing circular debt issue, sources told Business Recorder.
The circular debt in the petroleum sector has reached approximately Rs 2.8 trillion. The government, under Prime Minister Shehbaz Sharif is working to resolve this issue in consultation with the International Monetary Fund (IMF). An initial plan has been drafted to mitigate the gas circular debt without placing an additional burden on consumers.
To tackle core challenges in the gas sector — including circular debt, LNG tariffs, unaccounted-for gas (UFG) losses, and the rising share of LNG in the national gas mix—the government has established four specialized panels.
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The petroleum minister, who also chairs the main committee, is overseeing the sub-committees tasked with preparing final recommendations for the highest level of government.
In a recent meeting, a senior Joint Secretary from the Cabinet Division read out the composition and Terms of Reference (ToRs) of the four sub-committees.
Dr Fakhray Alam Irfan, Secretary of the Power Division and head of the sub-committee on LNG demand synchronization, reported that he chaired a meeting on July 21, 2025. The meeting included representatives from PSO, SNGPL, and CPPA. The Power Division presented a report on the forecasting and management of RLNG demand in the power sector.
Dr Irfan pointed out that one of the main issues discussed was the parking of NPD (Net Present Deficit) claims under LNG contracts due to reduced power offtake and the must-run status of RLNG-based power plants. He acknowledged that while the power sector has mostly consumed gas according to firm demand, occasional shortfalls in RLNG lifting occur due to fluctuating power demand caused by weather, generation mix, and system constraints.
He added that the pipeline storage limitations raised by the Petroleum Division are valid. To address this, he stressed the need for accurate demand forecasting and improved coordination between NPCC and SNGPL, except in unforeseen circumstances. He also recommended that the Finance Division be consulted on the NPD issue.
It was noted that the sub-committee on circular debt mitigation has not yet convened. However, the Additional Secretary (Policy) provided an update on the sub-committee for LNG tariff rationalisation, which met on July 19, 2025. Representatives from all companies across the LNG/RLNG supply chain participated.
The meeting covered detailed discussions on various RLNG pricing components. Suggestions were made for reducing or revisiting charges such as terminal fees by PQA, customs duty, FED, Sindh Cess, and company/importer margins. The sub-committee is currently reviewing these cost elements, and formal recommendations will follow.
Meanwhile, Ogra Chairman, Masroor Khan who leads the sub-committee on domestic gas tariff efficiency and transparency reported that their meeting on July 21, 2025, was attended by representatives from the Sui companies, KPMG, and the Petroleum Division. The focus was on enhancing operational efficiency and reducing UFG. He noted that the companies are making progress in lowering UFG levels in accordance with benchmarks set by the Ogra.
He also provided an update on efforts to review the Return on Asset (ROA) formula for Sui companies. Although the Ogra has made several attempts to hire a consultant, the process has so far been unsuccessful. Recently, the Ogra issued an Expression of Interest (EoI) to potential consultancy firms, and the selection process is expected to conclude soon.
Minister Ali Pervaiz Malik emphasized the Ogra must complete its review of each component of the Sui companies' revenue requirements within the next few weeks.
Copyright Business Recorder, 2025