To resolve the issue of the Unaccounted for Natural Gas (UFG) and to determine the exact gas losses of SSGCL and SNGPL, OGRA has invited expression of interests from the consultancy firms to undertake the study.

Under Regulation 3(B) of the PPRA Regulations of Consultancy Services Regulation 2010, Oil and Gas Regulatory Authority has invited EOI from consulting firms for conducting the UFG study. The firms are required to complete the assignment within 90 days of the commencement of study. However according to OGRA the “existing auditors of SSGCL and SNGPL are not eligible to participate in this assignment”.

Last month the Oil and Gas Regulatory Authority (OGRA), against the demand of 11 percent, had increased system losses in gas tariff from 4.5 percent to 7 per cent for SNGPL and SSGCL. The decision will help in generating additional revenue of Rs67 billion for both the utilities. The provinces of Sindh and KP were neither satisfied from the 11 percent demand, for UFG, of gas companies nor from the OGRA determination of 7.5 percent, and have protested against the decision.

The Khyber Pukhtunkhwa government expressed serious reservations over the increase of system losses in gas tariff from 4.5 percent to 7 per cent for the gas utilities.

According to the KP stand, the OGRA decision of increasing UFG would reduce the GDS share of the provinces and increase gas tariffs with effect from January 2015 for all consumers. Sindh, the major share holder in the natural gas supply, will face a decrease of Rs 13 billion in its share of GDS and similarly the KP share will also be reduced drastically.

According the Pukhtunkhwa government reduction in GDS will affect the economic stability of the province, an official of the KP government told The Nation. “We have requested OGRA to fix unaccounted for gas (UFG) for SNGPL at 4%,” the official maintained. Moreover, the official said that the increase in system loss will also enhance the consumer prices and OGRA cannot take the decision, regarding the price hike, without hearing all the stakeholders, the official insisted. “UFG is the new name of the ineptitude of the gas companies and they are charging the consumers for their inefficiencies,” the KP government official lamented.

Due to different perspective about the gas losses, OGRA decided to carry out a study to determine reasonable Unaccounted for Gas (UFG) benchmarks for natural gas sector. Study shall include proposals for incremental improvements in all components of UFG control.

The objective of the study, according to OGRA, is “to assist Oil and Gas Regulatory Authority for determining and fixing the UFG benchmark (s) for the gas utility companies i.e. SNGPL and SSGCL for next five years and thereafter development of a formula to calculate UFG on yearly basis keeping in view all the relevant factors as well as international best practices,”.

OGRA invited reputable consultant firms having minimum of ten years experience in operational, technical and financial matters of natural gas utilities operations inter alia including experience and strong knowledge of the international as well as the local factors which have an impact on UFG, its control, monitoring, measurements, gas purchase-sales reconciliations etc.

According to the definition of OGRA, Unaccounted for Natural Gas (UFG) means, “in respect of financial year, the difference between the total volume of metered gas received by gas utility companies during that financial year and the volume of natural gas metered as having been delivered by the licensees to their consumers excluding there from metered natural gas used for self consumption by the gas utility companies for the purposes of their regulated activity; and such other quantity as may be allowed by the Authority for use by the licensees in the operation and maintenance of their regulated activity,”.

“UFG is one of the major operational elements and bench marking of UFG greatly determines the operational efficiency of a transmission and distribution company. The companies in their different petitions have been arguing that following factors contribute to the UFG: leakages, measurement errors, size and age of network, law and order situation in different areas, increase in gas price, increase in gas theft by consumers and non-consumers, shift of gas sales from bulk to retail consumers, allowance for minimum billing, effect of power outage on buried steel pipelines.

Considering the importance of the issue, OGRA intends to carry out detailed evaluation in respect of its licensees i.e. Sui Northern Gas Pipelines (SNGPL) and Sui Southern Gas Company (SSGC) on various aspects of UFG components and its quantum through a consultant firm of eminence repute in the field.

The consultant will be tasked to suggest methodology of calculating UFG in the light of present practice, definition as per rules and international practices applicable.

An official source said that the technical experts from the provinces will be on the technical panel and they will assist/monitor the work of the consultants.