OGRA Reviews Gas Tariff Hike, UFG Reduction Plan

The Oil and Gas Regulatory Authority (OGRA) is currently evaluating proposals to revise gas tariffs for FY2026–27, following recommendations by an independent consultant to gradually reduce unaccounted-for-gas (UFG) losses over a five-year horizon.

According to reports, public hearings have been scheduled for May 12 in Lahore and May 13 in Karachi to review tariff petitions submitted by Sui Northern Gas Pipelines Limited (SNGPL) and Sui Southern Gas Company Limited (SSGCL).

The hearings had previously been postponed due to volatility in global energy markets linked to developments in the Middle East. However, regulatory requirements mandate OGRA to issue its determination at least 40 days prior to June 30 to ensure implementation from July 1.

Disclosures indicate that consultant KPMG Taseer Hadi & Co has recommended a phased reduction in UFG allowances to 6.5% in FY27, 6.3% in FY28, 6% in FY29, 5.8% in FY30, and 5.5% in FY31 for both utilities.

Additionally, SNGPL is proposed to receive an extra 0.5% allowance to account for operational challenges, while SSGCL would be granted an additional 1.7%. This would set SNGPL’s UFG allowance at approximately 7% in FY27, declining to around 6% by FY31, and SSGCL’s from roughly 8.2% to 7.3% over the same period.

At present, the prescribed system loss allowance in gas tariffs stands at about 7.6%, including a 2.6% performance-based component. Actual UFG losses, however, are reported at 8.8% for SNGPL and significantly higher at 13.6% for SSGCL.

The consultant further noted that under a 2016 decision of the Economic Coordination Committee, transmission losses are to be charged based on actual levels, subject to a cap of 0.5%, while distribution losses are determined according to actual performance.

For consumers connected to high-pressure transmission networks or dedicated pipelines, losses are calculated based on actual consumption, whereas for other consumers, the average UFG of the previous year is used for tariff determination.

The report also highlighted the absence of a defined benchmark for RLNG losses, with current pricing linked to indigenous gas loss averages. This methodology has reportedly increased RLNG sale prices by approximately Rs1,500 per mmBtu.

Separately, SNGPL has proposed an increase in its prescribed gas price from Rs1,853 per mmBtu to Rs2,084 for the upcoming fiscal year, factoring in the impact of LNG diversion.

These proposed tariff adjustments form part of broader efforts to align gas pricing with cost recovery requirements and obligations under International Monetary Fund programmes, aimed at ensuring timely revisions and addressing the accumulation of circular debt, which has surpassed Rs3 trillion.