Key Takeaways
- The government plans to allocate Rs. 46 billion for security to protect gas pipelines and oil and gas operations.
- This includes 14 dedicated security wings, with four wings for SNGPL pipelines and 10 for exploration activities.
- The move follows 23 sabotage incidents over the past two years, causing significant financial and operational losses.
The government of Pakistan is considering a substantial security plan, estimated at Rs. 46 billion, to protect oil and gas infrastructure in Khyber Pakhtunkhwa and Balochistan. This plan aims to safeguard gas pipelines and oil and gas exploration operations following a series of sabotage incidents.
According to the proposal, the security mechanism will consist of 14 dedicated wings, with four wings specifically tasked with protecting SNGPL pipelines and northern gas sources. The remaining 10 wings will be deployed under a CPEC-style security framework to protect exploration, drilling, wellhead, and processing activities.
The establishment cost for the four dedicated wings is estimated at Rs. 12 billion, with an annual recurring cost of Rs. 4 billion. After accounting for two already deployed wings, the additional requirement for two more wings is estimated at Rs. 8.969 billion, with an annual recurring cost of Rs. 2 billion.
The other 10 wings will be established under a CPEC-style security framework, with four wings deployed in Khyber Pakhtunkhwa and six in Balochistan. Their establishment cost is estimated at Rs. 30 billion, with Rs. 12 billion allocated for Khyber Pakhtunkhwa and Rs. 18 billion for Balochistan.
The Rs. 30 billion cost of the E&P security mechanism is proposed to be shared equally by E&P companies, the federal government, and the respective provincial governments, with each contributing Rs. 10 billion. The annual recurring cost of Rs. 10 billion would be borne entirely by E&P companies, with no additional financing cost, prescribed gas price impact, or consumer pass through under the proposed arrangement.
The government’s proposal follows around 23 sabotage incidents over the past two years, involving the Shewa and Bettani pipelines and SNGPL’s main northern network. These attacks have caused an estimated loss of 7,624 million cubic feet of gas, equivalent to about 25 LNG cargoes. The financial loss was estimated at Rs. 12.7 billion at a local gas price of $6 per mmBtu and Rs. 27.7 billion at an RLNG price of $13 per mmBtu.
The government estimates that a complete suspension of northern gas supplies would force SNGPL to rely more heavily on expensive RLNG, adding Rs. 97 billion to its annual revenue requirement. This could raise the utility’s prescribed gas price by about Rs. 333 per mmBtu, from Rs. 1,719 to Rs. 2,052 per mmBtu during the current financial year.
Currently, the northern network receives 556 mmcfd from indigenous sources, including 146 mmcfd from recent discoveries at Mami Khel, Shewa, and Spinwam in Waziristan Block, Bettani under the Wali Exploration Licence, and Koi Palak in the Baska North Block. The existing security arrangements include about 1,513 personnel protecting SNGPL pipelines at an annual cost of around Rs. 3 billion and another 1,828 personnel deployed by E&P companies at a cost of about Rs. 2.174 billion a year.
