Mar 7 - 13, 2011

Sui Southern Gas Company (SSGC) is on the road to recovery. This could be gauged from the impressive financial results of the company. SSGC has posted profit after tax of Rs2,113 million for the half year ended December 31, 2010 as compared to net profit of Rs219 million posted for the corresponding period, a whopping increase of Rs1,894 million. This translates into earning per shares of Rs2.52 from Rs0.33.

Last year, SSGC profit plummeted mainly because of higher unaccounted for gas (UFG) that resulted in even greater penalties imposed by Oil and Development Regulatory Authority (Ogra). The ultimate aim was to bring the figure at par with the benchmark of 5 per cent fixed by Orgra.

At the same time, the company successfully pleaded its case with for relaxing the stringent UFG benchmarks to a more realistic level. The company's proactive stance along with Ogra's timely action helped to propel SSGC's profit after-tax to Rs4.4 billion during the fiscal year 2009-10 as compared to mere Rs256 million for 2008-09. Consequently, the earning per share increased to Rs6.55 from a low of Rs0.38.

There has never been greater awareness and realization about the perils of UFG within the management and employees of SSGC. Every one contributed its bit and worked collectively to fight the UFG menace. The efforts yielded results, not only the increasing trend of UFG was contained in volume terms, there was also a decline in 2010.

Management considers this the beginning to regain the lost strength of SSGC. In order to further control the menace of UFG, the management is following a new approach that essentially entails: 1) Unification of CRD, billing and distribution functions, 2) Using data for trend analysis and decision making and 3) Identifying and quantifying leakages and thefts.

Keeping in view the gravity of situation, the company has prepared short-term, medium-term and long-term strategies for controlling UFG. The short-term strategy involves "pulling up the sales and pushing down the purchases. It comprises of 1) reducing gas pressure manually during off-peak hours but maintaining optimum pressure within the entire system, 2) checking/replacing meters not recording consumption appropriately, 3) undertaking pressure surveys of commercial customers to determine the actual supply pressures against contracted pressure and 4) load survey of industrial consumers.

The medium term strategy to bring down UFG comprises of the following seven components: 1) Replacement of aged/deteriorated pipelines, 2) Underground leakage rectification, 3) Overhead leakage rectification, 4) Cathodic protection upgrade, 5) Installation of Automatic pressure management systems, 6) Smart Metering and 7) Improvement of surveillance at industrial customer meter station/gas connection point.

The long-term strategy comprises of 1) Planned rehabilitation starting from supply mains, 2) Develop a ring of supply main around Karachi to act as an alternate supply main, 3) Insertion of High density polyethylene (HDPE) pipeline in existing supply mains and in distribution network and 4) Capacity building for energy auditing (to relate rate of production/ power generation of industries/captive power with gas consumed).

With the assistance of a US$200 million loan from the World Bank, SSGC intends to implement a project named natural gas efficiency project for the main purpose of reducing UFG. Under this project, SSGC will replace approximately 5,750 km distribution pipeline (excluding supply main) during the next five years along with overhead and underground leak survey and rectification of 1.6 million customers and about 18,700 km of network.

It is projected that after the completion of this project SSGC may save UFG volume of approximately 21 billion cubic feet per year. The groundwork for rehabilitation was laid by the company itself when a comprehensive proposal it had framed for controlling UFG was lapped on by World Bank as part of the Natural Gas Efficiency Project.

It is anticipated that after proper implementation of the short and medium term components of the UFG reduction strategy, the UFG situation will improve and the company will be able to substantially bring it down. On the other hand, the SSGC management has been advocating to its workforce the need to exercise maximum restraint and plough back increased profits into much greater productive use for resuscitating the company's fortunes.

In addition, the SSGC management is formulating a massive restructuring plan to put the company back on the road to growth and profitability. To rationalize the re-structuring process, two operational units (North and South), each headed by a Deputy Managing Director, were created to ensure better control, operational efficiency and accountability for the overall objectives of taking the nagging issue of UFG with unparalleled vigor. The challenge lies in the successful implementation of the plan and creation of geographical units.

The proposed organizational restructuring model was developed from ground- level up and was thoroughly discussed at all levels in the company. The general consensus was that it was the most practical approach towards curbing the rising trend of UFG as well as meeting other objectives such as customer-centric focus, one-window operation and operational efficiency, employee empowerment and performance evaluation, company-wide profitability, resource optimization and maintenance and rehabilitation. In fact, when it was applied on a trial basis, the restructuring model proved to be a success.

A new trend of chairing meetings of departments has started to encourage not just departmental heads and its executives but even grassroots level staff to share their processes and experiences with the senior management. The management has been channelizing its efforts to ensure that departments coordinate with one another by following a bottoms-up approach and share responsibilities and increase scope of activities for ultimately bringing down UFG volumes. While myriad challenges still need to be surmounted, the company has flourished because it has moved beyond the 'business as usual' attitude and has taken charge of its own destiny.