SNGPL Rationing and Oversupply Issues
Sui Northern Gas Pipelines Limited (SNGPL) has not been able to avoid rationing gas without prior notice, despite being in the summer season. This is in response to internal wrangles over the allocation of pipeline capacities to private suppliers. The crisis has been exacerbated by an oversupply of imported LNG, forcing local gas producers to reduce their supply.
Over 170 LNG shipments have been delayed by the government, but local producers, such as Oil and Gas Development Company Limited (OGDCL), have been requested to reduce their production. Consequently, approximately 300 million cubic feet per day of local gas production has been reduced, posing cash flow problems for both state-owned and independent producers.
Impact on Local Producers
The reduction in intake is involuntary, which has been publicly criticized by OGDCL, the largest gas producer in Pakistan. This cut production by about 76 mmcfd of gas, 1,148 barrels of crude oil, and 55 tons of LPG per day according to its latest report as a result of reduced gas purchases by SNGPL of the significant fields such as Qadirpur, Nashpa, and Chanda. Revenue of the company declined to 310.9 billion in the first nine months of FY25, as compared to 348.1 billion in the previous year.
This decrease in production not only reduces company profits but also compromises the exploration and development of new reserves, exacerbating Pakistan’s energy security.
Rising Costs for Consumers
Producers are struggling financially and consumers are struggling with an increase in gas prices. Beginning July 1, 2025, the fixed monthly fee was doubled. A family that used 450 gallons of gas is able to pay an almost $2,500 bill with taxes and surcharges. In the meantime, SNGPL regulates the amount of gas supplied to residential and commercial customers by limiting its supply to only a few hours a day.
Private Suppliers and Market Tensions
The government tried to relieve financial pressure by permitting domestic producers to sell part of their gas to individual purchasers. Corporations, such as MOL-Pakistan and Petroleum Exploration Limited, began selling gas to third parties. Nevertheless, SNGPL opposed such arrangements, stating that they constitute a distortion of the market. Although the board had approved pipeline allocation to the participants in the private sector, SNGPL management declined to handle the allocation, which raised additional doubt.
SNGPL is still faced with a financial challenge as industrial consumers have been shifting towards cheaper private gas. The scenario is indicative of the ongoing tug-of-war between utilities and suppliers.
New Gas Levy Proposal
To settle the conflicting issue, the Ministry of Law issued a clarification stating that the captive power levy applies to LNG as well as local gas, regardless of the supplier’s source. This implies that there will be no more sales to captive power plants that will not be regulated by the Levy Act of 2025. Pricing will be determined by the Oil and Gas Regulatory Authority (OGRA) with the goal of creating a level playing field between public and private suppliers.
Mounting Circular Debt and Outlook
The government is already under intense pressure to stabilize the energy sector, as the circular debt of the energy sector has already passed 4.6 trillion. The proposed levy has the potential to create short-term parity but fails to address the structural deficiencies of the gas market in Pakistan. This will require long-term reforms, investment in exploration, and increased transparency in LNG contracts to regain trust in the industry.
