ISLAMABAD: The Federal Cabinet has allowed Sui Companies (SNGPL and SSGCL) to provide RLNG connections to pending applications at OGRA’s determined rates.
This was formally announced by the Minister for Petroleum and Natural Resources, Ali Pervaiz Malik and Minister for Parliamentary Affairs, Tariq Fazal Chaudhry at a joint press conference .
According to the details, Cabinet Committee on Energy (CCoE) in its meeting held on December 20, 2022 considered a summary submitted by Petroleum Division and approved the proposals related to completion of incomplete gas development schemes for the period 2013 to 2018. However, CCoE did not approve the proposals regarding indigenous gas based new connections due to scarcity of natural gas in the country.
It may be recalled that in 2017 Federal Cabinet on July 04, 2017 relaxed the moratorium for provision of RLNG based connections and load enhancement to industry (process / captive), commercial arid new housing societies / colonies provided that the cost of laying of dedicated line for supply of RLNG from the nearest pipeline network will be borne by the RLNG consumer.
Based on the decision of the CCoE, no applications for new gas connections on indigenous gas are being processed by Sui companies. However, RLNG based connections are being allowed as per Federal Cabinet decision. For the new housing schemes/colonies, RLNG connections on OGRA notified tariff are being allowed where new network has been laid at the cost of developer/consumer where no supply/connections of indigenous gas is available. As such the Sui companies refrain from providing RLNG based domestic connections in the existing housing colonies and localities where natural gas is already being supplied to domestic consumers at the indigenous gas tariff. Both Sui companies have so far provided 33,808 RLNG based connections as detailed below
Both the companies have reported that around 150,898 new applications (SNGPL:136,903 and SSGCL: 14,086) of the prospective RLNG consumers have also been received and are under process. On the other hand, it has been reported that SNGPL has a pendency of 3.2 million applications for natural gas based connections without any further processing despite the fact that around 240,000 applicants have made payments for connections and around 4,000 applicants have also paid urgent connection fee of Rs 25,000.Similarly,in the case of SSGCL around 19,797 natural gas based domestic applications are pending for processing.
Both Sui companies are not providing RLNG based connections to pending applicants of indigenous gas connections for the fear that it will end up in litigations on the basis of discriminatory treatment qua tariff difference of indigenous gas and RLNG. However, if the parties i.e. consumers and Sui companies can enter into a formal water tight contract based on free will and consent, the chances of litigation may reduce or even do not arise.
It is important to highlight that Government through its nominated buyers i.e., PSO and PLL entered into long-term LNG supply contacts with Qatar Energy and ENI respectively for import of 10 LNG cargoes per month which is equivalent to 1,000 mmcfd volume. LNG was primarily imported to meet the demand of power sector while balance was made available to industry (process/captive). LNG Sale Purchase Agreements (SPAs) carried 100% take or pay clause for PSO/PLL whereas instead of mirroring the same clauses, the Gas Supply Agreements (GSAs) with power plants were executed initially at 66% of minimum take-or-pay and later revised to 50% from January 01, 2025. Before the commissioning of these LNG based power plants, it was assumed that these plants being most efficient would be placed higher in Economical Merit Order (EMO) and/or to be declared as must-run plants for peak loads which did not happen. With the passage of time, LNG demand of power sector has reduced substantially due to availability of generation from other sources which has led to issues of surplus LNG in the system. This LNG glut in system has further been exacerbated with drastic decline in LNG consumption by CPPs owing to imposition of grid transition levy. SNGPL has reported that around 11 cargoes are surplus for July to Dec 2025 and similarly for calendar year 2026 some 40 LNG cargoes are estimated lo be surplus, considering the projected demand of power sector and demand destruction in the CPPs. As a result, SNGPL is constrained to divert expensive RLNG to domestic sector.
To deal with issue of surplus LNG, SNGPL intends to curtailment of gas production form local fields, which ranging between 250 to 400 mmcfd, to maintain the integrity and safety of the system owing to higher line pack pressures. Curtailment of local production in turn is impacting the revenues of E &P Companies besides impacting the production of condensate/crude oil and LPG from oil and gas fields. As per the Estimated Revenue Requirements (ERR) for CFY as determined by OGRA, the cost of diversion of RLNG to domestic sector on SNGPL network has been estimated at Rs, 242 billion against 24 cargoes which led to increase in consumer gas prices effective July 01,2025.
Foregoing in view, Petroleum Division proposed that moratorium imposed on provisions of new connections may be relaxed allowing Sui Companies to process all applications for provision of connections on RLNG based on OGRA determined and notified monthly RLNG tariff for distribution network.
