OIL AND GAS REGULATORY AUTHORITY

Concept, Organization, Role & Working

Civil Service Academy Lahore

December 10, 2014

REGULATORY REGIME CONCEPT 11

Role of Government Liberalization Public private partnership Privatization Deregulation

2Foreign investmentPrivate institutionalSustainable economic growthCompetitionJobsPoverty alleviation

2

Organogram

Chairman

Member (Oil)Member (Gas)Member (Finance) Senior Executive Director Executive Director Joint Executive Director Deputy Executive Director Assistant Executive Director Support staff33

OGRA Ordinance 2002 AutonomousIndependent Exclusive powers Policy guidelines (GoP)Midstream and downstream Foster CompetitionForeign Direct InvestmentLevel playing fieldProtect Public InterestEffective & Efficient Regulation44

Section 2 (xxxii) - Regulated activity means an activity requiring a license under the Ordinance

Oil : Pipelines, refineries, storages, lube oil blending plants and marketing of petroleum products Natural Gas: Pipelines, transmission, distribution, sale/ storage CNG : Storage, filling / distribution LPG : Production, storage, filling, marketing / transportation / Setting up of LPG Refueling Stations LNG : Construction License / Receiving Terminal, Operations, Sales and MarketingRegulated Activity55

OGRA notify and monitor:Wellhead PricePrescribed Price of natural gasConsumers price of gas (GoP advice)CNG Consumer price LPG?Enforcement of performance / technical / safety and service standards

65 (1)

FIXATION OF WELLHEAD PRICES HISTORICAL PERSPECTIVE1985 1991 :66% of High Sulphur Fuel Oil (HSFO) less negotiated discounts1991 1992 :57% of HSFO less negotiated discounts1992 1993 :100% of HSFO less negotiated discounts1994 onwards :Zone-wise gas prices indexed to the basket of crude oil prices with progressive capping / sliding discounts.

75 (2)

Natural Gas Pricing 8Determination of the revenue requirement / prescribed price : Cost of Gas (Producers Price) Transmission & Distribution Cost Return on Assets UFG Benchmark Consumer price5 (3)

Determination Estimated Revenue Requirement For FY 2014-15

CNG Pricing Cost of GasValue Added Compression costOperating ExpenseOwners margin Gas Infrastructure Development Cess Sales TaxConsumer price105 (6)

115 (7)

GoP approved Ex-Depot Pricing Formula125 (8)

a.Ex-Refinery/Import price: linked with PSO actual import cost and prevalent international Arab Gulf prices during the pricing period as published by Platts Oilgramb.Inland Freight Equalization Margin (IFEM), as computed by OGRA to keep the ex-depot prices uniform upto 22 oil storage depots of OMCs spread across the country.c.OMC Margin have been fixed by ECC as follows: MOGAS Rs. 2.35/ ltr, HOBC Rs. 1.72/ ltr, KERO Rs. 1.58/ ltr, LDO Rs. 1.61/ ltr and HSD Rs. 2.35/ ltr.d.Dealer Margin have been fixed by ECC as follows: MOGAS Rs. 3.08/ ltr, HOBC Rs. 2.15/ ltr, and HSD Rs. 2.60/ltr. e.Petroleum Levy under Petroleum Product (Petroleum Levy) Ordinance 1961. f.Depot price before General Sales Tax (GST) (a+b+c+d+e )g.General Sales Tax @ 17% of (f)h.Ex-Depot Sale Price (g)

Legal Framework

Pakistan Petroleum (Refining, Blending and Marketing) Rules 1971 CNG (Production & Marketing) Rules 1992LPG (Production & Distribution) Rules 2001Natural Gas Licensing Rules 2002Natural Gas Tariff Rules 2002Budget Committee Rules 2004OGRA LNG Rules 2007 Natural Gas Well head Price Rules 2009Natural Gas Regulated Third Party Access Rules 2012Pakistan Oil Rules, 2009 (Pending with Federal Government)OGRA Natural Gas Theft Control Rules, 2011OGRA (Fines and Recovery) Rules, 2009136

Quasi-judicial Role

Designated OfficerAppeal AuthorityReview AuthorityHigh Court147

Licenses158

LNG06CNG3573LPG Producers & Marketing CompaniesLPG Construction License for Re-fueling StationsLicense for LPG Auto Refueling StationsLPG Construction License for Storage and Filling Plants109720635Oil Refineries Oil Marketing CompaniesLube Oil Blending / Reclamation Plants Lubricant Import Companies5238090

Financial Resources & BudgetSelf financing through collection of fees and charges from the licenseesBudget Committee Rules 2004Accounts subject to audit by independent firm of Chartered Accountants as well as the Auditor General of PakistanOGRA Financial Regulations 2005169

Supply / Demand of gas1710

Way ForwardConservation--- a national strategyAllocation of gas to most efficient sectorReduction in losses in transmission / distributionImport of gas --- LNG, IP, TAPI Increased efforts to enhance indigenous natural gas through intensified exploration efforts Pakistan is # 9 in Shale gas reserves in the world. The technology is expensive but it will pay off all expenses at the end of the day. It is very important that we must explore this area as early as possibleWe must go for alternate energy sources; solar, wind, coal, biogas and nuclear to lessen burden on natural gas18

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