The Oil and Gas Regulatory Authority (OGRA) has approved a substantial hike in gas prices for the current fiscal year, in line with a key condition set by the International Monetary Fund (IMF).
OGRA has authorized an 8.71% increase in gas prices for Sui Northern Gas Pipelines Limited (SNGPL), and a 25.78% rise for Sui Southern Gas Company Limited (SSGCL). As a result, the average gas price for SNGPL will now stand at Rs1,778.35 per MMBTU, while for SSGCL, it will rise to Rs1,762.51 per MMBTU.
This decision has been sent to the federal government for final approval. OGRA has indicated that the revised gas prices will come into effect from January 1, 2025, based on the federal government’s guidance.
The profitability of the Sui companies is largely influenced by the return on average operating assets (AOA). In a petition filed in October 2024, SNGPL requested an AOA of Rs147 billion, an increase from the previously approved Rs108.2 billion. However, OGRA has kept the AOA at Rs108.57 billion, a figure almost identical to the previous approval. The return on these assets has been set at 25.92%, yielding approximately Rs37.8 billion, including Rs9.7 billion from RLNG assets.
Regarding SNGPL, unaccounted-for gas (UFG) losses are estimated to be 7.37% across the distribution and transmission networks. However, OGRA has capped the allowable UFG at 6.3% for FY25, disallowing 4,410 MMCF, which is expected to result in a financial loss of around Rs6 billion.
If SNGPL is granted full pass-through of finance costs, its earnings per share could rise to Rs28.2, up from Rs17.3 under the current setup. The recommended gas price increase is expected to address a historical shortfall of Rs610 billion, with the average price per MMBTU rising from Rs1,635.9 to Rs1,778.35, contributing an additional Rs55 billion to the revenue requirements.
