Two gas utilities to become five

The Pakistani government is reviving plans to unbundle the country's two major gas utilities, Sui Northern Gas Pipelines Ltd (SNGPL) and Sui Southern Gas Company Ltd (SSGCL), into five separate entities. The proposed structure includes a single transmission company and four provincial distribution firms, mirroring a model used for former Wapda electricity companies.

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The reform framework also proposes the restructuring and unbundling of the Sui companies by separating their transmission, distribution and energy businesses, while creating greater opportunities for private sector participation throughout the gas value chain.

This initiative, discussed in a meeting led by Petroleum Minister Ali Pervaiz Malik and World Bank Country Director Bolormaa Amgaabazar, aims to create more opportunities for private sector involvement across the gas value chain. An official statement indicated that the reform framework proposes separating transmission, distribution, and energy businesses within the Sui companies.

Sources suggest that major business groups are interested in the transmission sector through privatization. However, the distribution sector faces significant challenges, including issues with transfer pricing, cross-subsidies, and uniform national gas prices despite varying system losses across provinces. The plan was initially shelved in 2020 after independent consultants and the Oil and Gas Regulatory Authority (Ogra) raised concerns about financial and technical viability.

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The meeting reviewed and endorsed the strategic direction of Pakistan’s gas sector reforms.

Despite previous opposition, the Petroleum Division is now pushing to secure the prime minister's approval this month. The division plans to appoint a transaction adviser, with costs potentially financed by the World Bank or shared by the gas utilities, to oversee the unbundling process. Notably, both SNGPL and SSGCL, along with their shareholders, reportedly oppose the proposed restructuring.

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Following the prime minister’s approval, the Petroleum Division will initiate phased implementation of the reform programme in consultation with all stakeholders to ensure a smooth and sustainable transition to a modern, competitive and financially viable gas sector.