Gas Sector Reforms Needs Quick Approval
Gas Sector Reforms Needs Quick Approval: Based on recommendations of the World Bank, Prime Minister (PM) Abbasi has asked the provincial governments at all forums for gas sector reforms to facilitate private operators into the system and expanding two gas utilities of SNGPL & SSGCL into at least 5 public sector companies.
During the sequence of discussions, the federal and the provinces decided to appoint a transaction advisory firm (TAF) to examine the reason of downfall of Sui Northern Gas Pipelines Ltd (SNGPL) and Sui Southern Gas Company Ltd (SSGCL) and its effect on the shared capital, equity and return to the shareholders and how to move forward on the reforms.
About 9 local and international firms showed interest in becoming the transaction advisers (TAF) while some of them expressed concerns over the tight deadlines of the job. Conditions to place foreign experts in Pakistan over the longer terms were also objected. These consultancy firms included AF Ferguson & Co, EY Ford Rhodes, KPMG Taseer & Hadi, Deloitte Yousuf Adil, Raiz Ahmed & Co, Bridge Factor Corporate Finance, Arif & Associates, Bridggit Pvt and McKinsey & Co. The bidders also had reservations over the 6 month time required for completing the task but noted that seeing the volume of work and elections to come with the new government, the time line was insufficient.
Government had proposed to undo the SNGPL and SSGCL in a way that separates their transmission and distribution businesses. There would be at least 5 fresh licenses. It will include a transmission operator and 4r distribution companies having provincial boundaries as their sales areas to supply only domestic gas to residential consumers. The provinces have opposed this structure. Instead they proposed that the provinces should have control over the gas from gas field to the consumer, entire transmission and its distribution.
Under Gas Reform, average cost of gas for end consumers (mostly residential and commercial) would increase by 170 to 330% in 4 different reform models in the next 10 years, i.e. by 2026, and yet the prices would be cheaper than imported re-gasified liquefied natural gas (LNG).
Government should resolve the objections surfaced by the provincial governments and the consultants to quickly resolve this matter.