Key Takeaways
- The government is finalising plans to split the two major gas utilities, SNGPL and SSGCL, into five smaller companies.
- A transmission company and four provincial distribution firms will be created under the proposed reforms.
- The plan aims to increase private sector participation in the gas value chain.
ISLAMABAD: The government is once again finalising plans to unbundle Pakistan’s two major gas utilities, Sui Northern Gas Pipelines Ltd (SNGPL) and Sui Southern Gas Company Ltd (SSGCL), into five smaller companies. This move follows a meeting led by Petroleum Minister Ali Pervaiz Malik on Tuesday.
The proposed reforms include the creation of one transmission company and four provincial distribution firms, mirroring the restructuring of more than 15 ex-Wapda generation, transmission, and distribution companies.
During the meeting, World Bank Country Director for Pakistan, Bolormaa Amgaabazar, was also present. The reform framework aims to separate the transmission, distribution, and energy businesses of SNGPL and SSGCL, while opening up greater opportunities for private sector involvement in the gas value chain.
Informed sources stated that some major business groups are interested in the transmission business through privatisation. However, the distribution sector faces significant challenges due to issues such as transfer pricing, cross-subsidies, and varying levels of system losses across different provinces.
Previously, independent consultant KPMG and the Oil and Gas Regulatory Authority (Ogra) had opposed the proposed unbundling model on financial and technical viability grounds. They suggested broader consultations with provinces and private shareholders, leading to the shelving of the plan in 2020.
The Petroleum Division now aims to fast-track the restructuring process and secure prime ministerial approval by the end of August 2026. The minister directed officials to prepare a finalised roadmap for this purpose.
For the unbundling, a National Gas Transmission Company (NGTC) will be established to take over the transmission systems and business of both gas utilities. This company will operate as a common carrier for existing and newly created gas distribution companies, similar to the National Transmission and Dispatch Company (NTDC) in the power sector.
The plan also envisages third-party access by private firms to the NGTC network. Both SNGPL and SSGCL, along with their shareholders, oppose the proposed unbundling due to financial concerns and are unwilling to finance the process.
Under the new structure, a transaction adviser will be appointed to work out the unbundling of SNGPL and SSGCL into five companies. The cost of this adviser’s services would either be financed by the World Bank or shared equally by the two gas utilities and recovered through end-consumer tariffs.
