Karachi: Suis Northern Gas Pipelines Limited (SNGP) projected a suspension of 354 MMCFD of natural gas purchases from local exploration and production companies (E&P), citing an excess offer of liquefied natural gas (RLNG) and the gradual anticipated gradual lag of captive electricity consumers.
The gas suspension provided for the current exercise, as indicated above by SNGP, amounted to 86 mmcfd. Any natural gas suspension of interior E&P companies would also have an impact on crude oil production, given the parallel production of the associated gas fields. A significant drop in oil and gas production would negatively affect overall GDP growth, especially since mining and careers (including oil, gas and coal) hold a weight of 9.0% in the industrial sector. In addition, the profitability of E&P companies would be affected negatively, according to a research note from Securities Topline.
To respond to a planned revenue deficit of 207 billion rupees, SNGP proposed an increase of 40 to 42% of gas prices compared to July 2025. This deficit comes mainly from the expected income loss due to the diversion of gas supply, captive electric units to domestic consumers, in response to RLNG in the system. The figure also includes a late payment supplement (LPS) of 96 billion rupees.
For exercise 26, the SNGP expects the diversion of RLNG to national consumers reaching 242 mmcfd, compared to the 164 MMCFD approved by the oil and gas regulatory authority (OGRA) for financial year 25 in its examination of the estimated income requirement (RERR). The additional 78 mmcfd of RLNG diverted to domestic users should cause an additional deficit of 70 billion rupees, as the average RS1,000 / MMBTU rate for residential consumers is significantly lower than that of the RS3,500 / MMBTU rate invoiced to captive power units.
The company has included 96 billion rupees in its estimate of financial year 26 due to LPS, in accordance with its usual practice. However, Ogra generally rejects this component and analysts expect the regulator to do it again. Excluding LPS, the increase in required prices would reduce to around 19-20% compared to 40 to 42% offered. Even so, it is expected that OGRA will not approve of the full increase and will revise it downwards.
Due to the recent decrease in the cost of debt (KIBOR), the scheduled average cost of capital SNGP (WACC) on operational fixed assets is now 23.39%. For financial year 26, the company proposed average fixed assets of 124 billion rupees, compared to 109 billion rupes approved by OGRA in FY25 RERR, indicating a net increase of 15 billion rupees.
According to Topline Securities, the long -term objective of the government as part of the IMF program is to increase dependence on the national network by discouraging the use of captive power. While the government initially committed to the IMF to disconnect the gas supply to captive units by the end of January 2025, it then adopted an alternative approach: to increase the prices to push consumers to the network. In mid-March 2025, an RS791 / MMBTU grid sample was imposed above the existing RS3,500 / MMBTU rate.
However, several companies have obtained suspension orders against the higher court tax. Industry sources suggest that gas prices and samples for captives will continue to increase until the cost of electricity production in captivity lines up with the National GRID price.
For the future, the government plans to negotiate with Qatar for a reduction in the number of RLNG cargoes or a lower price revision. The existing 15 -year supply agreement, signed in February 2016, includes a price review clause after 10 years. If the two parties do not reach a consensus on prices, the mandate of the agreement would automatically shorten at 11 years, noted the Topline titles.
Originally published in The news