OGRA Announces 10% Reduction in Gas Rates Effective From July 1

May 24, 2024Zayn0

The Oil & Gas Regulatory Authority (OGRA) moved quickly in the early hours of Tuesday to meet the deadline set by the International Monetary Fund (IMF). The OGRA also provided sufficient material to the government to raise consumer gas rates by approximately 87 per cent starting on July 1st, while determining a reduction of up to 10% in the average prescribed price of natural gas.

OGRA “Calculations on Sui Companies Revenue

OGRA “calculates Sui companies’ revenue requirements for FY25.” The recommended average price of gas per million British thermal units (mmBtu) is Rs1,635.90, with a Rs179.17 decrease in price per mmBtu.

Financial Impacts For 6 years

In addition, OGRA said that it had estimated the financial impact of the adjustment made during the preceding six years at Rs580.6 billion, compared to Sui Northern Gas Pipelines Ltd.’s Rs862.6 billion claim, which “has been referred to the federal government for an appropriate policy decision.” These revisions from previous years are due to average price increases that OGRA permitted from FY19 to FY24, but which the government did not fully pass on to consumers.

Sui Southern Gas Company’s Average Prescribed Price

Sui Southern Gas Company Ltd. (SSGCL) saw an average prescribed price set by OGRA of Rs1,401.25 per mmBtu, “with a decrease in price per mmBtu of Rs59.23 or 4pc,” the regulator said. It would cover the Karachi-based company’s projected FY25 revenue needs of Rs289.5 billion.

Recovery of super 10%tax 

Based on a 26 per cent return on the weighted average cost of capital (WACC) and the imposition of a 10 per cent super tax to be recovered through average pricing, the expected revenue requirements for the two enterprises have been determined.

Power Sector Requirement

It also revealed that the power sector, which had required 10 cargoes per month for its power plants, was not using its LNG share, and that this was a key contributing factor to the increase in the prescribed price. The residential sector received costlier LNG imports instead.

Conclusion:

To comply with the IMF’s standards, balance the revenue requirements of gas firms, and guarantee affordability for consumers—while accounting for historical pricing disparities and power sector LNG utilization—OGRA has announced a 10% drop in gas rates.

 

Zayn

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