S.KAMAL HAYDER KAZMI,
Research Analyst, PAGE
Nov 5 - 11, 2012
Oil and Gas Regulatory Authority (OGRA) has been set up under the Oil and Gas Regulatory Authority Ordinance in March 2002 to foster competition, increase private investment and ownership in the midstream and downstream petroleum industry, protect the public interest while respecting individual rights and provide effective and efficient regulations. As laid down in the Ordinance, the Authority comprises one Chairman and three members.
Consequent upon the establishment of OGRA in March, 2002 the Natural Gas Regulatory Authority (NGRA) was subsumed by the OGRA. All properties and works done by the NGRA were transferred to and protected under the OGRA Ordinance. OGRA was, therefore, in a position to start its functions in respect to natural gas immediately upon its establishment.
The Federal Government has now w.e.f. March 15, 2003 assigned functions for the regulation of activities relating to LPG (liquefied petroleum gas) and CNG (compressed natural gas) sectors in the country to OGRA and has designated the OGRA as an authority in place of the director general (gas) of the Ministry of Petroleum and Natural Resources.
During fiscal year 2010-11, OGRA has been quite successful in achieving its objective to foster competition with increased private investment and ownership in the midstream and downstream petroleum industry and protect the public interest by providing effective and efficient regulations.
A new aspect of OGRA activities pertains to grant of four licences for the construction of LNG import terminal at port qasim under OGRA (LNG) rules, 2007 enabling the licensed companies to import and inject approx 1,830 mmcfd re-gasifies LNG into Pakistan to meet the country projected shortfall in natural gas supplies. OGRA has also issued 33 licences for construction of LPG auto refueling stations and two marketing licences for the same in accordance with LPG rules, 2011. This arrangement will not only result in creation of infrastructure in LPG sector but also lead to greater use of LPG in automotives in the wake of ban on new CNG stations and depleting natural gas reserves.
One of the main functions of the authority is the determination of revenue requirements of natural gas utilities which are entitled to minimum return of 17.00 per cent SSGCL and 17.5 per cent SNGPL on their net operating fixed assets before tax and financial charges.
During the year under review, the authority decided six cases including two motions for review of its decisions relating to estimated revenue requirement of the two gas utilities. These decisions were made after in-depth scrutiny of the capital and operating expenditure based on prudence, optimization, improved service to customers and safeguarding public interest. The authority provided full opportunity to all stakeholders to express their viewpoint which were given due consideration before taking the decisions. The authority issues eighty two well head gas prices notification for fifty one gas fields and fourteen notification of ex-depot sale price of petroleum products along with Arab light crude oil.
Unaccounted for gas (UFG) levels of SSGCL and SNGPL have been a major concern for the authority as 1.00 per cent UFG of both the companies at an average price of gas in FY 2010-11 translated to revenue loss of about Rs 2.68 billion per year. OGRA has fixed targets in respect of UFG (line loss) and the human resource cost to improve operational efficiency of the companies. As a consequence of enforcement of the UFG targets during FY 2010-11, an estimated additional burden of approx Rs 4.0 billion on gas consumers was avoided as the companies absorbed it from their own profit.
More recently, OGRA has presented the new formula for CNG pricing to SC. The Authority (Ogra) is expected to allow a margin of Rs 6 to 7 per kg to CNG sector on account of production cost/operational cost.
If the formula is accepted by the SC, the commodity would be sold at about Rs 69-70 per kg in region-I and at Rs 60-61 in region-II. In compliance with the SC decision the OGRA on October 25, 2012 reduced CNG price from Rs 92.54 to Rs 61.64 per kg in region-1 comprising Potohar, Khyber Pakhtunkhawa, and Balochistan while in region-II comprising Sindh and Punjab from Rs 84.54 per kg to Rs 54.16 per kg. The reduction in CNG prices in region-I is Rs 30.90 per kg while in region-II Rs 30.38 per kg. The CNG production cost is Rs 20.80 per kg, which consists of eight components ie, electricity cost of Rs 10 per kg, Rs 0.59 depreciation cost of machinery, Rs 0.8 spent on lubricants, Rs 0.59 on services provision, labour cost Rs 3.3 and Oil Marketing Companies (OMCs) are charging Rs 3.3 per kg for using their brand name if CNG facility and petrol pump are operating together.
During 2011 the total production of petroleum products (energy and non-energy) remained 9.40 million tones compared to 9.53 million tonnes during 2009-10; thus posting a negative growth of 1.36 per cent. Out of 9.40 million tonnes 8.91 million tonnes are energy products while 0.49 million tonnes are none-energy products. The total import of petroleum products were 12.37 million tonnes while total export of petroleum products were 1.57 million tonnes in 2010-11.
During the period July- March 2011-12 there was a negative growth of 27 per cent in the export of petroleum products and a positive growth of 37.7 per cent in the import of petroleum products.
FUEL ADJUSTMENT CHARGE
FAC (fuel adjustment charge) or FCA (fuel cost adjustment) or FPPCA (fuel and power purchase cost adjustment) is amount that utilities apply on bills based on varying price of fuel or coal. The price of coal or fuel changes every month based on demand and supply of coal and thus cost of producing electricity changes accordingly. The electricity generation companies pass on this cost to distribution companies who there by pass it on to consumers.