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The Oil and Gas Regulatory Authority (OGRA) has approved a substantial increase in gas prices for the current fiscal year, aligning with a key condition set by the International Monetary Fund (IMF).
As per the announcement, OGRA authorized an 8.71% hike in gas prices for Sui Northern Gas Pipelines Limited (SNGPL) and a 25.78% increase for Sui Southern Gas Company Limited (SSGCL). Consequently, the average gas price for SNGPL will rise to Rs1,778.35 per MMBTU, while SSGCL’s average price will increase to Rs1,762.51 per MMBTU.
The decision has been forwarded to the federal government for final approval. OGRA clarified that the revised prices will be implemented based on federal government advice, likely effective from January 1, 2025.
The profitability of the Sui companies is heavily dependent on the return on average operating assets (AOA). In a petition submitted on October 28, 2024, SNGPL requested an AOA of Rs147 billion, up from the previously approved Rs108.2 billion. However, OGRA has maintained the AOA at Rs108.57 billion, nearly unchanged from the earlier approved figure. The return on these assets has been set at 25.92%, resulting in a return of approximately Rs37.8 billion, including Rs9.7 billion from RLNG assets.
For SNGPL, unaccounted-for gas (UFG) losses are estimated at 7.37% across distribution and transmission networks. However, OGRA has capped the allowable UFG for FY25 at 6.3%, resulting in the disallowance of 4,410 MMCF, which translates to a financial loss of approximately Rs6 billion.
If SNGPL is permitted a full pass-through of finance costs, its earnings per share could rise to Rs28.2, compared to Rs17.3 under the current parameters. To address a historical shortfall of Rs610 billion, the average gas price per MMBTU is recommended to increase from Rs1,635.9 to Rs1,778.35, adding Rs55 billion to the revenue requirement.
