Karachi’s industrial sector accuses SSGC of supplying natural gas at high prices

• The industry sector says the SSGC had no mandate to set the rates.
• SSGC CEO refuses to sell gas bought at high prices at low prices.
• It asks industry whether SSGC could cut off supply if it didn’t need it.

KARACHI: Industrialists in Karachi have accused Sui Southern Gas Company (SSGC) of burdening the industrial sector with expensive LNG without a mandate to fix the rates, The news reported on Tuesday.

The charges were leveled during a public hearing by the Oil & Gas Regulatory Authority (Ogra) on SSGC’s application for review of its estimated revenue/price projections for FY2023-24.

The industrial sector also entered into a heated debate on the price of LNG for industries and unaccounted gas losses (UFG) with the SSGC chief stating that he will stop supplying natural gas to industries if they do not need LNG.

The industrialists said that the SSGC increased the LNG prices without having the mandate to fix the rates and also charged Balochistan’s UFG losses to the industries in Sindh.

However, SSGC CEO Imran Maniar said: “We cannot sell LNG that is bought at a high price from the international market at lower prices.” He added that it was not possible to supply LNG to industries at domestic prices.

He even asked the industrial sectors if SSGC could stop supplying natural gas if they did not need LNG. Later, talking in the NewsManiar said the company bought the two spot cargo at a high price compared to domestic gas as domestic gas tariff for industries is Rs 2,100 per MMBTU and LNG price is Rs 4,000 per MMBTU.

Prominent businessman Zubair Motiwala, speaking on behalf of the industrialists, said that industries are closing down and Ogra should realize this as industries are suffering due to cross subsidy in fertilizer and domestic sectors.

He said the fertilizer industry was making profits but was being given subsidized gas. Zeeshan Bashir, another industry representative, said gas prices have gone up. In August the share of imported and domestic gas in the energy mix was 25 and 75% and now it is revised to 40 and 60%, which would not be feasible for the industry.

The SSGC Managing Director said that if industries did not want to take LNG, then they would have to take the limited domestic gas availability, adding that it was the hard work of SSGC that the industries were running even in December due to the gas arrangement.

He also dispelled the impression that Balochistan’s UFG losses were being borne by the industries in Karachi.

Speaking on SSGC’s review petition filed before Ogra, Maniar said that during the hearing the company had estimated excessive losses from the Balochistan region. The recent increase in gas tariffs will increase the monthly gas bills of Balochistan consumers to Rs 90,000 per month for many, while 65% of consumers in the province have an income of Rs 25,000 or less. Hence, the company will end up incurring heavy losses if it is not allowed to recover the shortfall in revenue from other consumers.

Ogra Chairman Masroor Khan said domestic gas reserves are depleting and LNG is being imported for domestic needs. “We have to accept that imported gas is expensive and it is SSGC’s decision to determine what would be a mix of imported and domestic gas,” he added.

Earlier, the SSGC in its report projected a revenue shortfall of Rs 47.773 billion or Rs 226.18 per MMBTU for natural gas consumers and Rs 18.13 billion or Rs 39.23 per MMBTU for RLNG consumers.

The report noted that the projected domestic gas UFG is at 12.62% i.e. 40,026 MMCF, where Balochsitan UFG is at 57.68% i.e. 22,566 MMCF against a benchmark of 7.6%.

He said that the total disallowed UFG has been estimated at Rs 16.378 billion, while the disallowed UFG for Balochistan alone has been estimated at Rs 20.15 billion.

“Balochistan’s UFG ban should be allowed as a revenue shortfall in Balochsitan against the total company-wide disallowed UFG,” it said.