ISLAMABAD - The Competition Commission of Pakistan (CCP) has issued a Policy Note to Oil & Gas Regulatory Authority (OGRA) recommending it to exercise its powers under the OGRA Ordinance and take a decision regarding licence applications by potential new entrants, in the flare-gas distribution, at the earliest to remove entry barriers and encourage new investment in the sector.

The CCP made the recommendation after receiving concerns from potential market entrants in the market for flare-gas storage, distribution and transportation. Market entrants need to apply for licence to OGRA, however, CCP was informed by a potential entrant that its application remains pending although all formal processes were completed. The CCP therefore decided to assess possible anti-competitive impacts of such an impediment.

Flare-gas is regarded as a by-product during the extraction of petroleum. Using flare-gas can help in augmenting the supply of gas in the country.

 Till now flare-gas has not been utilised in Pakistan but it may provide a stepping stone for new entrants that are aspiring to enter the market for supply of natural gas.

OGRA, in its response to the CCPs queries, noted that the monopoly of Sui Northern Gas Pipelines Company Limited (SNGPL) and Sui Southern Gas Pipelines Company Ltd. (SSGCL) for transmission and distribution of gas ended on 30th June, 2010. OGRA stated that the current flare-gas policy issued by the Federal Government did not provide any guidance to determine: (i) producer price for flare-gas; (ii) tariff applicable for future similar cases; and (iii) tariff applicable for potential consumers.

The CCP noted that OGRA’s mandate was to foster competition and increase investment in the midstream and downstream market for petroleum. However, in the matter of issuing license for flare-gas distribution where prima facie all the requirements for issuance of license were met, not taking a decision on the issuance of license created a barrier to entry in the market. It therefore recommended OGRA to take a decision on the issuance of licence at the earliest as doing so would not only help in attracting much needed investment but would also incentivise incumbent service providers to be more efficient and innovative which would in turn benefit consumers.