Rationalization of Domestic Sector Gas Pricing – People always respond to incentives

1) LPG the poor man fuel is so very expensive compare PKR 6 per kg (first slab of domestic
sector up to 50 cubic meter or 1.78 MMBTU) with PKR 206 per kg (OGRA notified price for
February 2022 in Market it may be more during winters) and there use to be spikes in winter
but thanks to Irani imports and sanctions. For 1.78 MMBtu Piped Natural Gas fuel price is PKR
215 and LPG fuel price is Rs. 8120 as per OGRA notified price. Gas Tariff is PKR 121 per MMBtu
from domestic sector first slab in this winter when global spot prices spiked to more than PKR
10,000 per MMBtu.
2) The Govt should give direct subsidy to lower Stata of the society based on the data collected
Ehsan and FG programs. Currently around 60% consumers fall in lifeline slabs in summer and
all of them are availing hugely subsidized lifeline tariff which shall be stopped.
3) Mismatch between RLNG cost and domestic selling price has resulted in piling of huge
shortfall which will hit Rs. 200 billion this year.
4) OGRA was requested to allow diversion costs provisionally as per ECC’s direction. However,
this is not yet allowed.
5) WACOG model must be implemented for rationalizing RLNG diversion across the country
esp. in Punjab
6) To meet the demand of domestic consumers in Punjab, RLNG is being diverted towards
domestic sector in 8 months a year. In 2018-19, Punjab households/domestic sector
consumed 180 BCF natural gas while it produces only 3% of gas. 180 BCF is equivalent to about
60 LNG Cargoes at present spot rate of ~$100 million, its $6 bn gas we are wasting on stoves
heaters and geysers mostly inefficient as price signal is to waste the commodity.
7) Load Profiling in Domestic Sector need to addressed on urgent basis as winter demand is
more than 3-4 time the summer demand. Winter gas pricing should at least recover
prescribed price (for indigenous gas) at present we are not even recovering even the well
head price from domestic sector, cost of service and UFG is highest in the sector.

8) There is huge demand for domestic gas connections (Pendency is approx. 3 million) in
SNGPL. No extension of Domestic Sector Gas Network on System Gas, complete ban
permanently. New connection in the Country should only be given at RLNG price and one flat
tariff shall be determined and applicable in domestic sector which shall at least recover the
full cost of gas, at earliest. If Govt. wants to continue to subsidize the domestic consumers
then it should pay subsidy in cash.
Natural Gas pricing is not based on economic principles of scarcity and optimal utilization
which will result in misuse and misallocation of precious gas reserves.
(Excerpt from my presentation on Energy Security 2011)

Asim Riaz
February 11, 2022