RLNG prices to rise for Sui companies: OGRA

The Oil and Gas Regulatory Authority (OGRA) notified consumers about a two percent upward revision in the prices of Regasified Liquefied Natural Gas (RLNG). According to reports, this development will impact RLNG prices for customers of Sui Southern Gas Company Ltd (SSGCL) and Sui Northern Gas Pipeline Ltd (SNGPL).

The rise in prices for SSGCL is a result of OGRA approving increases in the company’s system losses from an abysmal 13 percent to an even worse 16.16 percent. For SNGPL, system losses did not rise liberally as OGRA revised losses from 8 percent to 8.6 percent.

The sale price of RLNG supplied by SSGCL at the transmission stage rose by over half a percent per unit to $10.65 per unit. Moreover, RLNG prices were even higher at the distribution stage, rising from $12.60 per unit to $12.67 per unit, which translates into a price hike of 0.57 percent.

Conversely, SNGPL reportedly recorded an increase in the price of RLNG, which was $0.23 per unit at the transmission stage and $0.236 per unit at the distribution stage.

While these price hikes may seem minor at first glance, one must consider the volume of domestic gas consumption. The magnitude of Pakistan’s gas consumption volume can be analysed once data from the International Energy Agency (IEA) is considered.

As per the IEA, Pakistan produced 854,568 tera joules of natural gas. However, domestic production has historically not been able to keep up with consumption as gas imports skyrocketed by 1527 percent from 2014-2022. The tragedy here is that experts are predicting that the increase in RLNG prices will not even significantly benefit both sui gas companies as system losses continue to worsen.

Instead of any entity enjoying great financial gains from price hikes, the economy is projected to bear the brunt of system losses instead. The industrial sector in Pakistan relies heavily on natural gas for the production of key chemicals that are used to produce fertilizers and manufacture plastics.

Pakistan is a net importer of fertilisers, and the increase in prices could reduce the competitiveness of locally produced fertilisers. The agricultural sector could consider substituting local fertilisers in favour of cheaper imported fertilisers.

As per reports, LNG importers and port authorities already enjoy considerable profit margins, and these could rise if domestic industries switch to purchasing imported LNG for production purposes instead.

Moreover, the plastic manufacturing sector might struggle once gas prices rise. Many are speculating that the ones hit hardest by the gas hike will be the small to medium-sized plants operating in either Sindh or Balochistan.