Amended WACOG bill to help streamline gas price structure

KARACHI: The upper house of parliament on Thursday passed an amended Weighted Average Cost of Gas (WACOG) bill that envisages pooling imported and locally produced gas to determine a stable price for consumers at large.

Historical reform

After the National Assembly, Pakistan’s Senate passed the Oil and Gas Regulatory Authority (Amendment) Bill, which was hailed by Federal Minister of Energy Hammad Azhar as a “historic reform which would guarantee Pakistan’s energy security. “The WACOG bill also passed the Senate today. This is a historic and long-awaited reform that will ensure Pakistan’s energy security,” Azhar said in a tweet.

Improved pricing structure

He said the bill would enable the government to embark on reform of the “gas pricing structure, remove anomalies and improve the supply of imported gas” and added that the reform is also important. approval of the Indicative Generation Capacity Expansion Plan (IGCEP) power purchase model.

A regulatory framework

According to an official statement, the amendment aims to place all licenses and prices for regasified liquefied natural gas (RLNG) within a regulatory framework.

This would allow OGRA to determine and notify the sale price of RLNG under the 2002 OGRA order, he said.

Price stability

Samiullah Tariq, head of research at Pak-Kuwait Investment Company, said the domestic gas wellhead price was determined twice a year through a public hearing, while the RLNG price each month , keeping in mind international market rates.

He said that after the bill passes, the two would be pooled to determine the weighted average price for domestic and industrial consumers.

End of public hearings

Under the amended law, the authority can decide the price without giving notice to the public and without holding a public hearing, if the prescribed price needs to be revised due to the revision of gas prices at the wellhead and the cost of imported gas.

“This means that after the pooling, there will be no public hearing to determine the price of gas for consumers in the event of fluctuations in the price of imported gas,” Tariq explained.

No allocation restrictions

He said that after the passage of the bill, there would be no restrictions on the allocation of imported gas to a particular sector and it would be available to all domestic and industrial consumers.

Through another OGRA-amended bill passed by the Senate, each natural gas licensee must pay the federal government the Development Surcharge on each unit of natural gas sold in the manner prescribed by the federal government under the Natural Gas (Development Surtax) Order of 1967.

The Natural Gas (Development Surcharge) Ordinance 1967 was enacted to provide for the levy and collection of a development surcharge on natural gas and related matters.

The Gas Development Surcharge (GDS) is essentially a differential margin between the selling price and the prescribed price of natural gas, meaning that this differential margin will emerge when the selling price exceeds the prescribed price.

Negative GDS

In the absence of an adequate increase in the selling prices of gas to consumers, the differential margin between the selling prices and the prescribed prices results in a negative GDS and this amended bill would eliminate the discrepancies between the regular determination and semi-tariff and notification, analysts said.

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