In a significant policy move, the Oil and Gas Regulatory Authority (OGRA) has approved a notable increase in gas prices that is expected to affect various sectors across Pakistan. The revised gas tariffs, which range from 7% to 17%, will be applied to the domestic bulk, general industry (processing), and power generation sectors.
A report by Topline Pakistan Research indicates that domestic consumers will see an increase in fixed charges of 50% to 100%, impacting household budgets significantly. For protected consumers, monthly charges will rise from Rs400 to Rs600, while non-protected consumers will experience an increase from Rs1,000 to Rs1,500 for consumption up to 1.5 hm³, and from Rs1,500 to Rs3,000 for higher consumption levels.
The revenue implications are substantial, with Sui Northern Gas Pipelines Limited (SNGP) projected to collect an additional Rs29 billion and Sui Southern Gas Company (SSGC) expected to gather Rs10.6 billion from these changes. The domestic bulk gas tariff has increased by 9.5% to Rs3,175/mmbtu, while the general industry (processing) tariff has seen a 7% rise to Rs2,300/mmbtu, poised to generate an additional Rs10 billion in revenue.
However, the textile sector, heavily reliant on natural gas for processing, may be adversely affected by these price hikes. The 7% increase in processing tariffs could strain margins, although the exact impact may vary among companies, with some manufacturers potentially leveraging alternative processing sources.
Overall, the total additional collection for the Sui companies is estimated at Rs63.3 billion, a critical boost amid ongoing financial challenges. Investment analysts maintain a “BUY” stance on SNGP shares, given its attractive price-to-earnings ratio of 4.3-5.0x for FY25/26, underscoring investor confidence amidst the evolving landscape.
As the energy sector continues to navigate these changes, the broader implications on the textile industry and consumer prices will be closely monitored in the coming months.
Courtesy- Topline Pakistan Research
