Private sector allowed setting up gas distribution firms

Karachi: The federal government has allowed the private sector to establish gas distribution companies a move that would end decades-old monopoly of the state-run Sui Northern Gas Pipelines Ltd.

According to Alfalah Securities Limited, (SNGP) and Sui Southern Gas Company (SSGC). As reported in the local newspaper, the government has already approved a mechanism for supply of gas to the private sector companies. Under the approved mechanism, exploration and production companies would be able to allocate 10% gas supply quota from new discoveries to the private sector gas distributors under mutually agreed terms and conditions. Three companies have already applied for obtaining licences under the new arrangement. Moreover, private gas distribution firms would be allowed to use the distribution network of SNGP and SSGC under the third party access rules. Moreover, the new firms would also be allowed to purchase liquefied natural gas and distribute it to consumers for ensuring uninterrupted gas supply to consumers. These measures would create a healthy competition among the gas distribution business which would result in better services to the end consumers. However, it would not have adverse impact on SSGC and SNGP as they earn through guaranteed return formula while additional income may also be generated through third party agreement with new companies. It may also lead to containment of UFG losses due to improved efficiency arising out of more participants catering to the needs of the existing customer base.