Two gas utilities to become five

Why This Matters

Key context: <p>ISLAMABAD: The government is once again finalising plans to unbundle the country’s two gas utilities into five smaller companies — one transmission company and four provincial distribution firms — on the pattern of the more than 15 ex-Wapda generation, transmission and distribution companies.</p> <p>The proposed gas sector reforms, including the unbundling of Sui Northern Gas Pipelines Ltd (SNGPL) and Sui Southern Gas Company Ltd (SSGCL), were discussed on Tuesday at a meeting led by Petroleum Minister Ali Pervaiz Malik on the government side and by World Bank Country Director for Pakistan, Bolormaa Amgaabazar, on the other.</p> <p>“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,” an official statement said after the meeting.</p> <p>Informed sources said some major business groups were interested in the transmission business through privatisation. However, the distribution sector faced serious challenges due to issues such as transfer pricing, cross-subsidies, and uniform national gas prices despite varying levels of system losses — the highest in Balochistan, followed by Khyber Pakhtunkhwa, Sindh, and Punjab.</p> <blockquote class="blockquote-level-1"> <p>Govt plans splitting SNGPL, SSGCL into one transmission and four provincial distribution companies</p> </blockquote> <p>Independent consultant KPMG and the Oil and Gas Regulatory Authority (Ogra) had previously opposed the <a href="https://www.dawn.com/news/1593048">proposed unbundling </a>model on financial and technical viability grounds and suggested broader consultations, including with the provinces and private shareholders. The plan was eventually shelved in 2020.</p> <p>The sources said the Petroleum Division now wanted to fast-track the restructuring and unbundling process and secure the prime minister’s approval this month.</p> <p>“The meeting reviewed and endorsed the strategic direction of Pakistan’s gas sector reforms,” the statement said, adding that the minister directed officials to prepare the finalised roadmap for the prime minister’s approval by the end of August 2026.</p> <p>“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,” it added.</p> <p>For this purpose, the Petroleum Division will seek the immediate appointment of a transaction adviser to work out the unbundling of SNGPL and SSGCL into five companies. The adviser’s cost would either be financed by the World Bank or shared equally by the two gas utilities and recovered through end-consumer tariffs.</p> <p>Interestingly, both companies and their shareholders oppose the proposed unbundling — effectively their dissolution — and are also unwilling to finance the process for obvious reasons.</p> <p>Under the plan, a National Gas Transmission Company (NGTC) would be carved out to take over the transmission systems and business of both gas utilities and operate as a common carrier for the existing and newly created gas distribution companies, similar to the National Transmission and Dispatch Company (NTDC) in the power sector, now renamed National Grid Company.</p> <p>The proposal envisages third-party access by private firms to the NGTC network. The transmission company would not itself engage in the sale or purchase of gas; instead, it would transport gas and charge wheeling fees to all suppliers and purchasers of locally produced gas or LNG. Some influential business groups with connections in policymaking circles are also said to be interested in acquiring a stake in the NGTC.</p> <p>The distribution networks of both utilities would then be divided into multiple gas distribution companies operating under unified principles within the jurisdictions of SNGPL and SSGCL. These smaller business units would be formed based on technical and economic criteria, including population, network density, gas demand, workload, supervision, and operational efficiency, to ensure their sustainability.</p> <p>The plan would also require a mechanism for weighted average sale price equalisation, or another suitable pricing mechanism, for gas sales. However, there is still a view within the Petroleum Division that the matter should be decided in consultation with all stakeholders and provincial governments, including approval from the Council of Common Interests (CCI), before appointing any consultant, since the terms of reference for the adviser would depend on the agreed mechanism.</p> <p>There is also opposition to splitting the two existing companies into five or more entities before the transaction adviser completes the advisory process, particularly regarding the feasibility of the proposed reforms.</p> <p><em>Published in Dawn, August 5th, 2026</em></p> This development from dawn.com highlights ongoing changes in the sector.