Islamabad, Jan 6: The diversion of Re-gasified Liquefied Natural Gas (RLNG) to the domestic sector in Sui Northern has sharply increased, rising to 450mmcfd in January 2025, compared to 250mmcfd in December 2024. This surge is contributing to a rise in circular debt in the gas sector.
The current domestic tariff is Rs1,250 per MMBTU, while the RLNG tariff stands at Rs3,600 per MMBTU, creating a loss of Rs2,350 per MMBTU, which adds to the mounting circular debt.
The estimated loss from the RLNG diversion to the domestic sector between November 2024 and March 2025 is projected to exceed Rs200 billion, a figure that will significantly impact the circular debt. If this loss is passed on to the gas company’s revenue requirement, it could lead to an exorbitant increase in gas tariffs.
The Sui Northern has confirmed that the domestic demand has surged to 950mmcfd, with 450mmcfd being supplied to domestic consumers, making the domestic sector the largest client of RLNG in its jurisdiction. The power sector receives 352mmcfd, and the export and non-export industry receives 200mmcfd.
Despite this, the cost of RLNG diversion to the domestic sector, amounting to Rs260 billion from FY19 to October 2023, has not been recovered, adding to the Rs2.7 trillion circular debt. Rs1 trillion of this debt is attributed to the lack of gas price increases over the last decade.
Additionally, the LNG transaction process is inefficient, with a 60-day cycle between recovery and payment, which complicates LNG cargo payments. The government is considering capping the RLNG diversion to the domestic sector while improving the recovery process to ease the burden on the gas companies. However, Ogra has allowed Sui Northern to charge Rs8.54 billion for financing costs in FY25 to ensure the RLNG supply chain remains operational.
