The petroleum ministry has held the Oil and Gas Regulatory Authority (Ogra) responsible for the recent fuel crisis in the country.

In a report submitted to the petroleum minister, the office of director-general for oil said that Ogra failed to perform its duty as a regulator as it did not take timely action to head off a crisis. Ogra’s ineffectiveness resulted in black marketing of petrol and diesel in many parts of the country.

Sources in the ministry said Ogra was supposed to take steps to ensure availability of petrol across the country not only by taking measures against hoarders and black marketers but also through timely imports to meet the shortage created by the shutdown of Parco due to floods.

“The Ogra teams did nothing other than to send show-cause notices to oil marketing companies (OMCs) during the crisis and to wait for the replies to such notices,” an official said.

Petroleum Minister Syed Naveed Qamar is expected to forward the report to the Prime Minister’s Secretariat because Ogra falls under the administrative control of cabinet division.

The report added that the petroleum ministry dispatched teams to various places to examine the availability of petrol at the designated retail outlets.

Meanwhile, the recent fuel crisis has served to sharpen the differences between the ministry and the regulator.

A ministry official alleged that senior officials of Ogra drew heavy salaries (up to Rs400,000 per month) but they hardly did anything for the benefit of the industry or the consumer.

“The situation was better when the OCAC was directly monitoring the supply situation in the country,” he claimed.

Officials of Ogra declined to comment over the report or the supply position in the country.

From Dawn News

Pakistan will push hard for quick implementation of a long-delayed trans-regional gas pipeline from Turkmenistan in a bid to ease its mounting energy crisis, Petroleum Minister Naveed Qamar said on Tuesday. Senior officials of Turkmenistan, Afghanistan, Pakistan and India on Monday inked the framework of an agreement to construct the project with an estimated value of $3.3 billion.

The project would pump natural gas to Pakistan and India through the southern Afghan province of Kandahar, the stronghold of the Taliban and its birthplace. More energy security could ease pressure on Pakistan’s government, which faces a range of challenges, from a home-grown Taliban insurgency to what will likely be years of economic pain after summer floods caused billions of dollars in damages.

But analysts said the agreement was still at a preliminary stage and that security challenges in Afghanistan and the tensions between India and Pakistan remained an obstacle. Proposals to build the pipeline have been on the table since the 1990s but war in Afghanistan delayed the project.

“We are following a very, very aggressive timeframe to conclude agreements on this project as early as possible,” Petroleum Minister Naveed Qamar told Reuters by telephone on his way home from Turkmenistan, where the agreement was initialled on Monday. “But it’s too early to say that when these agreements will be completed and when the project will be implemented. Everything is subject to conclusion of agreements.”

The big question is can Afghanistan provide security for the pipeline? A Taliban insurgency is still raging there after nine years of war and more uncertainty is expected after US troops start withdrawing next summer. Any new tensions between arch-enemies Pakistan and India could also complicate efforts to get the project moving. Qamar said a final framework agreement is expected to be signed at a summit of the leaders of the four countries in December.

A pact covering the broad principles of sale and purchase of gas was also signed. Although some Pakistani energy officials hailed the tentative agreement, analysts say it may just be more wishful thinking. “It’s an agreement to reach another agreement without any concrete details and until then it cannot be termed as important,” said Khalid Iqbal Siddiqui, director of Pakistan’s Invest and Finance Securities Ltd. “This is not the first time it has happened.” The planned pipeline would have initial capacity for 33 billion cubic metres a year and would run for nearly 2,000 km (1,250 miles), including 735 km across Afghanistan and another 800 km through Pakistan. Natural gas to fill the pipeline could be drawn from the massive South Iolotan deposit, currently under development, and the existing Dovletabad field.

Pakistan also hopes a major gas pipeline project from Iran will help it tackle its energy problems. In March, the two sides signed a deal to build a much-delayed $7.6 billion pipeline pumping Iranian natural gas to Pakistan. That project may also be fraught with political uncertainties as the United States has been discouraging Pakistan from any deal with Tehran because of its suspected ambitions to build nuclear weapons. Iran denies it has such ambitions.

via Business Recroder

The LPG Marketing companies, dealer and equipment manufactures/suppliers are striving hard to bring the autogas stations and provide alternative fuel for vehicles in the country. For the same, the LPG Association of Pakistan’s (LPGAP) proposed for allowing installation in resedential areas following the NFPA-58 regulations which the authority Oil and Gas Regulatory Authority (Ogra) has put down. Business Recoder report gives the details.

According to documents available with Business Recorder, the Authority’s rationale is that in a country like Pakistan appropriate locations of LPG dispensing stations is all the more important due to high population densities, poor traffic conditions, dismal public awareness towards safety and weak emergency response at local level. Authority said that National Fire Protection Association (NFPA-58), an International Code and Standards Organisation, provided guidelines on safety at LPG dispensing stations which do not adequately cover the safety requirements for areas around dispensing stations.

The federal government in September 2005 approved the use of LPG in automotives, subject to Ogra preparing a regulatory framework. The Authority accordingly developed regulatory framework in consultation with all the stakeholders and with approval of the federal government incorporated it in LPG Rules which were notified in March 2007.

The clause 2 (b) of the Regulatory Framework (RF) prohibits installation of LPG refuelling/dispensing in congested and residential areas: “The LPG auto refuelling/dispensing station shall not be located in congested or residential areas nor should any of the adjacent buildings be used for accommodation or public gathering of any sort.”

Documents revealed that the LPG Association of Pakistan (LPGAP) has expressed reservations on this clause terming it unnecessary if compliance with the NFPA-58 is ensured. LPGAP has argued that unsafe and unauthorised decanting of LPG, a practice which is rampant, poses a greater threat to public safety; and recommended curtailing and eradicating the decanting of LPG through rapid growth of LPG dispensing stations for which it is imperative to do away with clause 2 (b) of the Regulatory Framework. Spokesman of LPGAP has said that LPG marketing companies have sought licenses to set up LPG Autogas stations under the LPG Autogas Policy, 2005. LPG is used as an automotive fuel throughout the world including in the US, UK, India, and China. Some 10 million cars run on LPG across the globe. LPG Autogas Stations are the only way to completely eradicate the menace of illegal LPG decanting that has claimed several lives.

He said that LPG autogas stations would make product more affordable and introduce a safe and professional environment for the retail of LPG in accordance with international safety standards (NFPA-58) and best practices.

An interesting report from DAWN summaries the Asian Development Bank report which holds the Ministry of Water and Power and NEPRA (National Electric Power Regulatory Authority) responsible for power crises the country faces.

The Asian Development Bank has held two major power sector stakeholders — the Ministry of Water and Power and the National Electric Power Regulatory Authority (Nepra) — responsible for most of the ills Pakistan’s power sector is facing today, including loadshedding, system losses and high tariffs.
This puts a serious question mark on the performance of the two public sector institutions designed and set up to solve electricity problems and remove consumers’ sufferings. They have been blamed for stalling or delaying reforms launched by the government more than two decades ago.

In its “Technical Assistance Completion Report” on creation of Central Power Purchasing Agency (CPPA), the ADB said there had been setbacks to its technical assistance because of lax attitude of Pakistan authorities; it provided another opportunity to the lender to sell another technical assistance for strengthening the regulatory regime.

Because of delays in obtaining internal approval within the government, several milestones, including the establishment of CPPA, could not be achieved. “There were significant delays encountered i.e. converting the market rules guidelines into formal statutes; the incorporation/registration of CPPA and finalisation of its budget; and the nomination of its chief executive officer and senior management. The CEO still remains to be appointed by government after nearly 18 months of its inception,” ADB’s principal energy specialist F.C. Kawawaki said on Monday.

“The weak capacity of Nepra to formulate market rules delayed the implementation process and the ADB was requested to process a follow-up technical assistance to help Nepra in developing market rules,” he added.

Since 1998, the government has been implementing a strategic power sector restructuring and unbundling plan to end the persistent power crisis through increased investments to address longstanding fiscal, technical and fiscal deficits.

The ADB report said that the reforms process had been slow and power supply and infrastructure requirements did not keep pace with the rising demand, thereby constraining growth potential and the country’s competitiveness.

“The current generation shortfall is close to 40 per cent of the installed capacity and coupled with the overstressed power infrastructure results in eight to 10 hours of forced power outages. The inter-circular debt to the tune of Rs250 billion, which is nearly 40 per cent of the sector’s annual revenues, accentuates the situation,” it said.

The CPPA is a key organisation to look after contractual obligation between the government and power producers and between the producers and purchasers.

Although the power sector in Pakistan is mature enough to graduate towards formation of an independent CPPA, “a lack of thrust in political will impeded its implementation in true spirit”. Although consultants have submitted deliverables within agreed timeframes, “the weak capacity of the executing agency and political will of the water and power ministry have stalled the full establishment and operations of the CPPA”.

The ADB said that a lot apparently had been contingent in resolving major structural, technical, fiscal and governance gaps and implementing reform agenda on the part of the government: Nepra’s capacity to initiate the policy reforms that could convert the guidelines on market rules for electricity trading into formal industry regulations and solve circular debt problems had been marginal.

It said the government was also not ready to institutionalise the CPPA model because of exogenous factors like severe power shortages and emergency of ballooning circular debt.

“The creation of an effective CPPA without addressing or restructuring the past financial and fiscal deficits of the sector as well as without providing adequate safety valves to avoid such future recurrences has not been an effective exercise,” the bank said, adding that prior to CPPA creation, the government should have laid emphasis on resolving systemic, structural and fiscal constraints in the sector that had led to circular debt.

On its part, the ADB has learnt the lesson that experiences in one market cannot be directly replicated into another. A thorough plan based on ground realities is critical for success of any new institutional arrangement, particularly of the already challenged power sector.

The report said the ADB should not allow its international consultants to avoid travelling to Pakistan on security excuses.

The case of unsolved circular debts will lead to major oil crises says Parco and PSO. This is a long pending issue and government should now step up to play its role in resolving before it becomes the reason of further loss to the economy. The business recorder news item gives the details.

The country’s oil sector’s largest giants, Pak Arab Refinery Limited (Parco) and Pakistan State Oil (PSO), have warned the government of an imminent massive oil crisis due to the unresolved circular debt problem and have urged it to arrange funds for import of petroleum products, Business Recorder has learnt reliably.

Parco has urged the government to arrange funds via PSO to save it from default on account of Letter of Credits (L/Cs) for the import of crude oil. Parco revealed that its bank borrowing was rising due to non-payment of dues by PSO with Rs 145.4 billion receivables against different clients on Thursday morning.

“We are not in a position to open L/Cs to import crude oil due to non payment of dues by PSO,” Parco management said adding that its revenue has also drastically declined due to refinery’s closure caused by floods. The cash-strapped PSO has also informed the government that the strain on its cash flows for consistently carrying such receivables has limited its ability to guarantee the supply of the products to customers. “We have already defaulted on our obligations to the local refineries which require advance payment for the supply of products which is further aggravating the company’s liquidity crunch,” PSO management says.

“Due to floods in the country, our daily collection of funds has also reduced, worsening our cash flow problems and Pakistan Electric Power Company (Pepco) is not making payments from its own bill collection,” PSO authorities said. Government is doing its best to clear outstanding circular debt, PSO management said, “however, we need immediate help to meet our LC payment commitments for imports and non clearance of dues by power sector and other clients will disrupt the entire supply chain of petroleum products.”

PSO receivables against different clients as follows: WAPDA at Rs 47.3 billion, Hubco at Rs 58.4 billion, Kapco at Rs 27.69 billion, PIA at Rs 515 million, OGDC at Rs 328 million, KESC at Rs 1.55 billion, financial charges from PIA at Rs 960 million, price differential claims (PDC) on High Speed Diesel (HSD) at Rs 1.38 billion and PDC on imported PMG at Rs 3.375 billion.

PSO owes Rs 116.97 billion dues to local as well as international fuel suppliers as follows: Rs 37.108 billion to Parco, Rs 13.723 billion to PRL, Rs 9.36 billion to NRL, Rs 24.525 billion to ARL, Rs 4.69 billion to Bosicor and Rs 26.89 billion on account of L/Cs payments and other international fuel suppliers.

For the electricity traiffs the limit is beyond the skys. What new comes in is differentiated power tariff to be implemented from September 1. The Tribune gives the details:

The federal government has introduced differentiated tariffs for electricity consumers, to be implemented on bills sent after September 1.

Based on time-of-use metering, the move would translate into a reduction from 4 paisa to 48 paisa per kilowatt hour (p/kWh) for different consumer categories.

According to a notification, the current tariffs will be maintained for peak hours while the reduction will be applicable on off-peak hours for residential, commercial, industrial and bulk users.

The reductions in off-peak tariffs are as follows: 48 paisa per kWh for residential, 24 paisa per kWh for commercial, 10 paisa per kWh for B1 and 24 paisa per kWh for B2 industrial consumers. For bulk consumers, the reduction is four paisa per kWh and 14 paisa per kWh for C-1B and C-1C categories respectively. For street lighting, the reduction is 29 paisa per kWh.

Will this reduction matter much for the consumers?

The recent floods have not only caused loss to human lives and infrastructure but the water lost was also worth to irrigate 40 million acre of land. Following excerpt gives the details:

Pakistan lost water worth Rs240 billion due to lack of dams and water reservoirs in the country.

Chairman Fauji Fertilizer Company talking to media men said a quantity of water needed for irrigating 40 million acres land has been wasted. He said Rs6 billion worth of water is required for irrigating 1 million acres land.

According to economic experts, due to absence of political harmony the country not only faced worst ever floods but also failed to store water worth Rs240 billion.

In our last post, we highlighted the lack of control of OGRA over the LPG price dynamics. Now, OGRA has taken notice of the situation and have warned all LPG marketing companies to refrain from overcharging practices and follows the authority fixed prices. This dawn news report gives the details:

Oil and Gas Regulatory Authority on Friday fixed the maximum consumer price for liquefied petroleum at Rs95 per kg and issued stern warning to LPG marketing companies involved in price manipulation.

The authority fixed the maximum reasonable consumer price of locally produced LPG at Rs80 per kg and for imported LPG at Rs95 per kg. It also determined the price for mix of local and imported LPG at Rs82.71 kg.

The prices are applicable for all the urban and rural areas of the country except AJK, Fata and Gilgit-Baltistan where additional Rs30 for an 11.8-kg cylinder may be added to each type of LPG due to higher transportation cost.

Taking advantage of the leniency of the regulator, the LPG marketing companies and LPG distributors are selling the fuel at exorbitant rates up to Rs135 per kg in some parts of the country.

Ogra Executive Director Operations Sarmad Aslam took serious notice of the situation and issued warnings to all the LPG marketing companies to refrain from overcharging and follow the prices fixed by the authority otherwise punitive action would be taken against the manipulators.

He also advised the provincial governments to ensure that no company/distributor be allowed to charge more than the reasonable price determined and fixed by the authority.

Ogra said that strict action would be taken against companies failing to supply LPG at the determined prices which include heavy fines and revocation of their licences.

The authority however maintains that LPG is a de-regulated product and its prices are determined by market forces but under prevailing conditions the authority has intervened to ensure that cartels are not formed for charging a high consumer price of LPG.

Meanwhile, Chairman All Pakistan LPG Distributors Association Abdul Hadi Khan talking to Dawn on Friday said that the current crisis had arisen after PARCO shutdown and supply curtailment from Dhodak gas fields.

However he added that Ogra and the Petroleum Ministry should take action against the cartel of local LPG producers who were minting money from the consumers rather than fixing LPG price.

He alleged that local producers were charging Rs55,000 per ton for LPG which actual costs between Rs8,000 to Rs10,000 per ton.

He further said that due to cartel of local LPG producers, importers were facing serious financial risk.

The unjustified LPG price hike is now in notice of the Ministry of Petroleum and Minerals and they have question OGRA (the regulatory) authority on its failure to control the price in the domestic market. The report from Business Recorder gives the details.

Ministry of Petroleum and Natural Resources has expressed serious reservations over the failure of Oil and Gas Regulatory Authority (Ogra) in playing its due role for controlling LPG prices in the domestic market. Sources revealed to the Business Recorder that the Ministry in a strongly worded letter to Ogra has directed the authority to play its due role and take action against LPG marketing companies that are involved in inflate increase in LPG prices.

According to existing LPG policy, LPG companies are allowed to charge LPG prices that do not exceed the Saudi Aramco Contract Price (CP). “But Ogra has let LPG marketing companies raise the gas price many times during the month of Ramzan,” they said. Petroleum Ministry officials said that delay by Ogra in taking action against LPG marketing companies had raised questions about its role. The role of Ministry of Petroleum is to formulate policies whereas Ogra is a regulator and its responsibility is to ensure a price that does not exceed CP.

When contacted, Executive Director (Operations) Ogra, Sarmad Aslam confirmed that Ogra had received a letter from Ministry of Petroleum and would give its response soon. He said that due to closure of Parco refinery, country was facing LPG shortfall leading to a hike in its price. He maintained that Parco would take around 6-7 days to resume operation. He claimed that Authority had started action against undue hike in LPG prices from the weekend just past.

ECC in its meeting held on December 12, 2007 had decided to allow LPG producers to fix LPG prices on monthly basis by de-linking it with CP and disallowed Ogra to notify LPG prices on monthly basis. Ogra places LPG prices notified by marketing companies on monthly basis on its website. “However, LPG marketing companies allowed to notify prices once in a month, raised LPG prices many times during Ramazan which was against the spirit of the ECC decision”, the sources maintained.

Ogra was also authorised to monitor producer and consumer prices to retain them at reasonable level within the parameters of LPG Policy 2006. It was also decided that LPG producer price should not exceed the CP. Sources said that LPG prices in international market stood at $589 per ton on August 20 but LPG marketing companies were charging a higher price. Government’s flawed de-regulation policy of LPG prices has put the consumers at the mercy of LPG mafia on one hand and wiped out the importers on the other side, sources maintained. Ministry of Petroleum wrote a letter to Ogra after Petroleum Minister Syed Naveed Qamar had taken notice of unjustified hike in LPG prices by LPG marketing companies.

Importers are of the view that after de-linking the price from CP, the supply chain had suffered because of price difference between locally produced and imported LPG. Importers have also alleged that some powerful elements in LPG sector suddenly reduce prices to discourage importers when their shipments are about to reach Karachi causing a difficult situation for them to offload the imported product in the market.

The National Electric Power Regulatory Authority (Nepra) allowed on Tuesday a 26 paisa per unit increase in power tariff for consumers of nine distribution companies of Wapda from August 31 on account of monthly fuel cost adjustment.

A Nepra official told Dawn that power companies had sought an increase of 52 paisa per unit under the fuel adjustment formula for July.

But the power regulator allowed an increase 26 paisa and turned down the rest sought on account of system losses, late payments and overall circular debt.

The official said that Nepra had sent its determination to the federal government for notification. The new tariff will be recovered from consumers in the next billing month. The new tariff will not apply to KESC whose fuel-based tariff adjustment will be made separately.

With the latest increase, the tariff will see a cumulative surge of about Rs1.76 per unit in three months — May, June and July — raising the total per unit cost to about Rs4 per unit.

Last month, Nepra allowed a 64 paisa per unit increase and in June the government separately increased base tariff for all consumers, including KESC, by 7.6 per cent or 50 paisa per unit under an agreement with the IMF. Separately, Nepra increased 52 paisa per unit as monthly fuel cost adjustment for June.

Since March last year the government has increased tariff by about 80 per cent.

via DAWN.COM