Tuesday, August 17, 2010

Reorganise gas sector and open it up somewhat ?

The logic of doing so is almost the same as I have argued for electrical power sector.Here I would restrict myself to additional issues and considerations.Following would be the possible aspects of opening up of the gas sector:
1) Separate gas supply,Transmission and distribution as independent entities. To-date only two companies wholly control the sector;SNGPL and SSGC
2)Gas distribution function may be divided among several regional companies ala electrical sector.
3)Gas supplies could be taken away from SSGC and SNGPL which should only handle Transmission business.
4)Competition may be generated in gas supplies which we would elaborate in more detail elsewhere.
5)Gas supplier companies may be promoted which may procure gas from a variety of sources including LNG,pipelines from Iran and Qatar,local stranded gas.
6)A two track gas supply sector be established;one of controlled and regulated consisting of public sector and private companies opting to be in the assured regulated sector in a policy framework.The other sector to be open and unregulated meant for large industrial and utility consumers.This sector to be supplied by E&P companies that choose to be in the unregulated sector under a policy framework.Stranded gas,difficult areas,off-shore resources ,LNG and other imported gas could come under the open sector.
7) In this way,controlled sector would be available to supply residential customers and small industrial consumers.Large customers who may be able to afford higher spot prices or negotiated ones under long term bilateral contracts may be catered by this sector.

Too complicated and complex? in a way ,yes. it is complicated. Efficient markets often are.However easier said than done.It would require quite some analysis to implement this blue print.There are two major issues in Pakistan gas market requiring counteracting actions:cheaper retail prices for a poor populace and higher whole sale prices to stimulate the required investment in E&P sector.Our proposal ,for all its pitfalls,may be able to produce the aforementioned desired results.Moreover increasing the number of actors in the sector may promote creativity and competition.

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