Govt plans to unbundle SNGPL, SSGCL into five smaller companies

The Pakistani government is refining plans to break up the country's two gas utilities, SNGPL and SSGCL, into five smaller companies. The proposed restructuring, which includes establishing one transmission company and four provincial distribution firms, mirrors a similar initiative involving multiple ex-Wapda entities. This gas sector reform discussion took place on Tuesday, with Petroleum Minister Ali Pervaiz Malik leading the government side and World Bank Country Director Bolormaa Amgaabazar representing the other.

The proposed framework aims to separate the transmission, distribution, and energy businesses of SNGPL and SSGCL while fostering private sector participation in the gas value chain. Some major business groups have shown interest in the transmission business, while the distribution sector faces challenges due to transfer pricing, cross-subsidies, and uniform national gas prices, exacerbated by varying system losses across regions.

Previous consultants, including KPMG and Ogra, have expressed concerns over the financial and technical viability of the unbundling model, suggesting broader consultations, including with provinces and private shareholders. However, in 2020, the plan was abandoned. The Petroleum Division is now aiming to expedite the restructuring process and obtain the prime minister's approval by the end of August 2026.

The plan calls for the creation of a National Gas Transmission Company (NGTC) to manage the transmission systems of SNGPL and SSGCL, operating as a common carrier. The NGTC would not engage in gas sales but would charge wheeling fees to all suppliers and purchasers. The distribution networks would be divided into multiple gas distribution companies based on technical and economic criteria, such as population, network density, gas demand, workload, and operational efficiency.

A mechanism for weighted average sale price equalization would also be implemented. However, some influential business groups with connections in policymaking circles are interested in acquiring a stake in the NGTC, while the existing companies and their shareholders oppose the unbundling process, viewing it as a form of dissolution without their consent or financial support.