Karachi, May 21, 2025 – The Oil and Gas Regulatory Authority (OGRA) has approved a 6.6% increase in gas prices for consumers of Sui Northern Gas Pipelines Limited (SNGPL), a significantly smaller hike than the 40–42% increase demanded by the utility.
This decision comes as part of OGRA’s annual determination of the Estimated Revenue Requirement (DERR), aimed at balancing consumer protection with utility sustainability.
SNGPL had submitted a substantial request for a tariff increase to recover a staggering shortfall of Rs207 billion. This financial gap arose primarily due to the diversion of Re-gasified Liquefied Natural Gas (RLNG) to domestic sectors and the inclusion of a Rs96 billion Late Payment Surcharge in its revenue requirement. However, OGRA, consistent with its past decisions, disallowed the surcharge component, slashing the utility’s proposed increase.
Analysts at Topline Securities pointed out earlier that OGRA was unlikely to entertain the full surcharge amount. Indeed, OGRA rejected Rs95 billion from the requested surcharge, aligning with its historical approach of disallowing such burdens from being passed onto consumers. This leaves SNGPL in a challenging financial position, requiring it to optimize internal operations to manage the shortfall.
The burden on consumers was further eased after OGRA reported a 19% reduction in RLNG diversion to domestic use. This was facilitated by Pakistan LNG Limited (PLL), which negotiated with ENI to reroute several cargoes outside Pakistan between July and December 2025. As a result, the estimated indigenous gas curtailment was revised downward from 329 MMCFD to 295 MMCFD, reducing the financial impact on SNGPL’s balance sheet.
OGRA also adjusted the average operating assets of SNGPL to Rs104 billion, compared to the company’s original claim of Rs123.8 billion. However, the Weighted Average Cost of Capital (WACC) was increased to 25.92%, up from SNGPL’s estimate of 23.30%, offering some relief in terms of return on assets.
SNGPL’s unaccounted-for-gas (UFG) was pegged at 7.25%, a figure subject to revision during the subsequent review stages of the DERR process. Assuming a 1% disallowance in UFG and 88% pass-through of finance costs, SNGPL could potentially earn over Rs28 per share in earnings. However, any reduction in the pass-through ratio could negatively impact earnings significantly.
Going forward, OGRA’s decision will be reviewed by the federal government within 40 days, as per regulatory requirements. This review is also tied to structural benchmarks under Pakistan’s IMF program, which mandates gas price adjustments by July 1, 2025.
As RLNG continues to remain surplus, SNGPL is compelled to curtail over 300 MMCFD of indigenous gas, causing an estimated annual foreign exchange drain of $1.3–1.5 billion. To ease this pressure, experts suggest the government negotiate with Qatar to revise RLNG cargo terms under the existing 15-year contract, which allows for a price review in February 2026. Failing an agreement, the contract could be shortened to 11 years.
The decision by OGRA underscores the delicate balance between consumer affordability and utility viability. For SNGPL, the reduced approval not only stresses the need for internal efficiency but also heightens its reliance on policy interventions and renegotiated gas procurement contracts.