Govt keeps gas prices unchanged despite Ogra reduction

• SNGPL prescribed price set at Rs1,719 per MMBtu.
• SSGC prescribed price set at Rs1,691 per MMBtu.
• SNGPL expects Rs44bn surplus under unchanged tariffs.

ISLAMABAD: Consumers will not receive lower gas tariffs in FY2026-27 after the federal government decided to retain existing rates despite the Oil and Gas Regulatory Authority (Ogra) reducing prescribed prices for Sui Northern Gas Pipelines Limited (SNGPL) and Sui Southern Gas Company (SSGC), The News reported, citing senior officials.

The government has formally informed the International Monetary Fund (IMF) that it will maintain existing consumer gas tariffs, opting not to pass on the reduction in prescribed prices determined by the regulator.

According to a senior Petroleum Division official, Ogra has reduced the average prescribed price for the two gas utilities to Rs1,705 per MMBtu from Rs1,793 per MMBtu. The regulator fixed SNGPL's prescribed price at Rs1,719 per MMBtu and SSGC's at Rs1,691 per MMBtu.

Despite the lower prescribed prices, the government has decided against reducing consumer tariffs, allowing both utilities to remain in surplus. SNGPL is projected to post a surplus of around Rs44 billion, while SSGC is expected to remain in surplus by approximately Rs2.5 billion.

The reduction in prescribed prices stems largely from the exclusion of LNG diversion costs after QatarEnergy declared force majeure on LNG supplies to Pakistan on March 4, 2026. As a result, the cost of diverting imported RLNG to the domestic sector was not factored into Ogra's determination.

Officials said the gas utilities are expected to file revised tariff petitions once LNG shipments from Qatar normalise. There are indications that QatarEnergy may lift the force majeure by August 2026, after which LNG exports to Pakistan are expected to resume. Any renewed diversion of RLNG to domestic consumers would increase the prescribed prices.

Last year, Ogra had determined SNGPL's prescribed price at Rs1,895 per MMBtu, reflecting nearly Rs180 billion worth of RLNG diversion to the domestic sector. With the exclusion of those costs this year, the prescribed price has fallen significantly.

"We received Ogra's determination on June 23 and responded on June 30, informing the regulator that the government would maintain existing gas prices. The IMF has also been informed of this decision," the Petroleum Division official said.

Explaining why the government chose not to reduce gas tariffs in line with Ogra's determination, the official said maintaining current prices would ensure the financial stability of both gas utilities.

Meanwhile, Ogra has maintained significant disallowances against both companies over excessive Unaccounted-for Gas (UFG) losses. The regulator disallowed Rs15 billion for SNGPL and Rs21.5 billion for SSGC after both utilities exceeded the permissible UFG benchmark, which consists of a fixed loss of 5% and a variable loss of 2.5%.

SNGPL's system losses stood at around 7%, while SSGC recorded losses of approximately 12.5%.

Based on a study conducted by KPMG, Ogra has introduced new UFG benchmarks requiring both utilities to gradually reduce system losses over the next five years. The regulator plans to enforce annual reductions of 0.5 to 1%age point, with the objective of bringing average UFG losses down to 5.5%.