Key Takeaways
- The federal government plans to split Pakistan’s two state-owned gas utilities into five separate companies.
- The proposal includes one national transmission company and four provincial distribution companies.
- The reforms aim to expand private sector participation in the gas value chain.
The federal government has revived its plan to restructure Pakistan's gas sector by splitting Sui Northern Gas Pipelines Limited (SNGPL) and Sui Southern Gas Company Limited (SSGCL) into five separate companies. This proposal was discussed during a meeting on Tuesday between Petroleum Minister Ali Pervaiz Malik and World Bank Country Director Bolormaa Amgaabazar.
According to an official statement, the plan involves separating the transmission, distribution, and energy businesses of SNGPL and SSGCL while expanding opportunities for private sector participation. The government has directed the Petroleum Division to finalize a reform roadmap by the end of August for prime ministerial approval.
The restructuring process is expected to be financed by the World Bank or shared by SNGPL and SSGCL, with costs recovered through consumer tariffs. A National Gas Transmission Company will take over transmission assets from both utilities and operate as a common carrier for existing and future gas distribution companies. This company will not buy or sell gas but transport locally produced and liquefied natural gas while charging wheeling fees.
Four provincial distribution companies will manage gas networks based on factors such as population, network density, gas demand, operational workload, and efficiency. The reforms also propose introducing a pricing mechanism to balance gas sale prices across different regions.
While the government intends to accelerate the restructuring process, finalizing the model requires consultations with provincial governments and approval from the Council of Common Interests. Past resistance to this plan includes concerns raised by independent consultant KPMG and the Oil and Gas Regulatory Authority regarding its financial and technical viability.
Both SNGPL and SSGCL have expressed opposition to breaking up their existing companies, citing reluctance to finance the restructuring process. Some officials argue that a feasibility study should be conducted before any decision is made to split the utilities.
Despite these challenges, the government remains committed to pushing forward with the plan, aiming to begin phased implementation after securing prime ministerial approval.
