Government Plans to Impose New Gas Levy Amid SNGPL, Private Suppliers Clash

Sui Northern Gas Pipelines Limited (SNGPL) continues to ration natural gas without prior notice, even during the summer months, amid internal disputes over pipeline capacity allocation to private suppliers. At the same time, the government is preparing to impose a new gas levy on the power sector to create a “level playing field” between public and private gas suppliers.

Pakistan is currently facing a severe natural gas and LNG oversupply crisis. The government has postponed over 170 LNG import shipments, while SNGPL has forced local gas producers to shut down or reduce production, according to reports from Dawn.

This situation has caused significant financial losses for local producers, including the state-owned Oil and Gas Development Company Limited (OGDCL), which is listed on the London Stock Exchange. The crisis is also draining the country’s foreign exchange reserves and leaving consumers with high gas bills despite limited supply.

SNGPL has directed local gas fields, which produce cheaper gas, to reduce production to make room for expensive LNG purchased under binding international contracts. Consequently, over 300 million cubic feet per day (mmcfd) of local gas production has been curtailed. This has created cash flow problems for local producers such as OGDCL, GHPL, and private companies, impacting their ability to explore and produce gas domestically and internationally.

OGDCL, the largest gas producer in the country, has publicly criticized the situation. In a report to its board, the company disclosed that reduced gas intake by SNGPL from key fields like Qadirpur, Nashpa, and Chanda has resulted in a daily production loss of 1,148 barrels of crude oil, 76 mmcfd of gas, and 55 tons of LPG. The company’s sales revenue declined to Rs. 310.9 billion in the first nine months of the fiscal year, down from Rs. 348.1 billion in the same period last year.

While local producers are forced to cut supply, SNGPL has started rationing gas for residential and commercial customers, limiting supply to 2-3 hours during meal times. Adding to consumers’ burden, the government doubled fixed monthly charges starting July 1, 2025. As a result, a household that previously consumed Rs. 450 worth of gas now faces a total bill of nearly Rs. 2,500 after taxes and fixed charges.

To alleviate financial pressure on local producers, the government allowed them to sell some of their gas directly to private buyers. Companies such as MOL-Pakistan and Petroleum Exploration Limited have begun selling gas from fields like Razgir and Zahra North to third parties. However, SNGPL has opposed these arrangements, claiming they distort the market.

For example, SNGPL objected to the sale of gas from the Razgir field to a private buyer, arguing that the Rs. 791 per unit captive levy imposed on its industrial customers under IMF conditions does not apply to private suppliers. This has led many industrial customers to switch to cheaper private gas, further straining SNGPL’s finances.

Despite SNGPL’s opposition, its board of directors approved pipeline capacity allocation for Razgir gas to a private buyer. However, SNGPL management later denied this approval, although records show that nine out of 11 board members had signed off on the decision.

To resolve the ongoing conflict, the Ministry of Law ruled that the captive power levy applies to all consumers of LNG or local gas, regardless of whether supplied by public or private entities. The ministry clarified that while the sale of gas from producers to suppliers is deregulated, the sale from suppliers to captive power plants (CPPs) is not. The Oil and Gas Regulatory Authority (Ogra) will now set the price for such sales under the Levy Act of 2025.

With the energy sector’s circular debt exceeding Rs. 4.6 trillion, the government faces growing pressure to resolve the gas crisis. However, infighting between SNGPL, local producers, and private suppliers, along with rising costs for consumers, highlights the deep-rooted challenges in Pakistan’s energy sector.

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