ROLE OF OIL AND GAS REGULATORY AUTHORITY

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• ROLE OF OIL AND GAS REGULATORY AUTHORITY
• (OGRA)
• BY
• AHSAN MAQBOOL
• EXECUTIVE DIRECTOR (PC)
• Workshop on Universal Service Obligation,15 Jul
  07
• Taj Ambassador, New Delhi, India

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CONTENTS

• Petroleum Sector Regulations
• Profile of the Authority
• Powers and Functions
• Legal Framework
• Licences Granted
• Tariff Mechanism
• Tariff Structure
• Petroleum Products Prices
• LPG Prices
• Redressal of Complaints
• Way Forward

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PETROLEUM SECTOR REGULATIONS

• Establishment of Natural Gas Regulatory Authority
  (NGRA) in 2000 to regulate natural gas pipelines,
  transmission, distribution and sales thereof
• Establishment of Oil Gas Regulatory Authority
  (OGRA) in 2002 to regulate midstream and
  downstream oil and gas sector. NGRA subsumed in
  OGRA
• The Authority is independent in the performance
  of its functions and has exclusive powers to deal
  with the matters assigned in the Ordinance
• Government may issue policy guidelines not
  inconsistent with the Ordinance and the Authority
  is obligated to comply with such policy
  guidelines

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PROFILE OF THE AUTHORITY

• OGRA of following members appointed by the
  Federal Government through an open competitive
  process as under
• Mr. Munir Ahmad, Chairman
• Mr. Rashid Farooq, Member (Oil)
• Mr. M. H. Asif, Member (Finance)
• Member (Gas), Vacant (since 20.12.2006)
• Staff Strength 175 ( 84 executives and 91
  support staff)
• OGRA regulates 79 of the energy sector
• Objectives-
• Foster competition
• Increase private investment and ownership in the
  midstream and downstream petroleum industry
• Protect the public interest while respecting
  individual rights
• Provide effective and efficient regulation

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POWERS FUNCTIONS
- Main functions of the Authority are

• Grant of licences for regulated activities
  namely
• Natural Gas
• Pipelines, transmission, distribution, sale and
  storage
• (ii) CNG, LPG and LNG
• Installations, production, storage,
  transportation and marketing
• (iii) Oil
• Pipelines, refineries, storages, lube oil
  blending plants and marketing of petroleum
  products

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POWERS FUNCTIONS

• Determination of revenue requirement and
  prescribed prices of natural gas utilities
  notification of prescribed and consumers sale
  prices
• Determination notification of consumers prices
  of petroleum products in consultation with the
  Federal Government
• Enforcement of standards and specifications for
  refined oil products as notified by the Federal
  Government
• Enforcement of technical standards (best
  international practices) in all the regulated
  activities
• Resolution of public complaints and disputes
  against licensees and disputes between licensees

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LEGAL FRAMEWORK

• Established comprehensive legal framework through
  notification of various licencing rules, natural
  gas tariff rules, complaints resolution procedure
  regulations, performance service standards of
  gas companies
• Work on formulation of various rules/regulations
  i.e. LNG Rules, Gas Theft Rules, Promotion of
  Fair Competition Rules, Enforcement Rules,
  Revised CNG Rules, Revised LPG Rules and
  Performance Service Standards for oil
  activities in progress

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LICENCES GRANTED
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TARIFF MECHANISM

• Gas utilities are entitled to fixed rate of
  return (SNGPL 17.5 and SSGCL 17) on operating
  assets (ROA) before tax and financial charges
• Prudent, cost effective and economically
  efficient capital expenditure is allowed in the
  asset base for rate of return purposes
• Prudent operating and maintenance costs are
  accepted in the determination of revenue
  requirement
• Incentives for efficiency
• UFG / Line Losses Benchmarks (entire saving kept
  by Utility)
• Human Resource (HR) Cost Benchmark (Equal sharing
  of savings)

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TARIFF MECHANISM

• The process is transparent and ensures effective
  participation of consumers and general public

Admission of Petition
Public Notice
Public Comments / Interventions
Public Hearing
Final Scrutiny
Authoritys Decision
Federal Government Advice
Notification of Gas Prices
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TARIFF MECHANISM
EFFICIENCY INCENTIVES FOR GAS COMPANIES
UFG / Line Losses Benchmarks
Recurring Saving Rs.2.5 billion / annum
Benchmark set by OGRA
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TARIFF MECHANISM

• EFFICIENCY INCENTIVES FOR GAS COMPANIES
• Human Resource (HR) Cost Benchmarks
• Actual HR cost for FY 2004-05 used as base year
  and indexed in subsequent years on the following
  basis
• 50 of notified consumer price index
• 60 of incremental number of gas consumers
• 20 of incremental transmission distribution
  network
• 20 of the incremental sales volume
• Sharing of Savings or Excess in
• a) UFG Entirely by gas companies
• b) HR Cost Equally between gas companies and
  consumers

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TARIFF STRUCTURE
SUI NORTHERN GAS PIPELINES LIMITED
Rs./MMBTU
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TARIFF STRUCTURE (FY 2007-08)
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TARIFF STRUCTURE (FY 2007-08)
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PETROLEUM PRODUCTS PRICES

• Determination notification of petroleum
  products prices transferred to OGRA from OCAC
  w.e.f. 01-04-2006
• Specific policy guidelines approved by the
  Cabinet in March, 2006 for computation of prices
  are as follows
• - Ex-refinery Price based on Import Parity Price
  Excise Duty Petroleum Development Levy
  (PDL) Inland Freight Equalization Margin
  (IFEM)
• - Marketing Companies margin (3.5) Dealers
  commission (4.0) added
• - GST _at_ 15 added to arrive at the Ex-Depot Sale
  Price of MS, HOBC, Kerosene Oil and LDO
• Price of HSD which is the major product is
  notified by OMCs on the basis of weighted average
  cost of local and imported supplies

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TARIFF STRUCTURE (w.e.f. 01-05-2007)
HSD is based on PSOs price Custom duty on HSD
is Rs. 3.14 per litre
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LPG PRODUCERS PRICES

• Under the Federal Governments policy, prices of
  local LPG producers are fixed on the basis of FOB
  prices of LPG in the Middle Easts market for
  each month
• LPG consumers prices are de-regulated, however,
  OGRA is authorized to intervene in the event of a
  cartelization / unreasonable prices. The
  reasonable price to be fixed by OGRA is based on
• Import parity price of LPG
• The local producers price
• Reasonable profit margin of LPG companies based
  on their last 2 years audited accounts.
• The current price is Rs. 622.51/- per domestic
  cylinder on an average basis which is reasonable
  as per above policy

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REDRESSAL OF COMPLAINTS

• Complaints redressal mechanism as specified under
  Complaints Resolution Procedure Regulations, 2003
• Complaint entertained if the consumer fails to
  get relief from the licensee
• Senior officers have been delegated the powers to
  resolve the complaints after getting requisite
  information from complainant, concerned company
  and, if required, after hearing the parties
• Any person aggrieved by the decision of the
  delegated officer has a right to appeal to the
  Authority for review of the decision
• Any person aggrieved by the decision of the
  Authority has a right of appeal in the higher
  Courts

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REDRESSAL OF COMPLAINTS
Summary of Complaints (FY 2006-07 up to
31-05-2007 )
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Way Forward

• Expected audience
• Oil Gas regulators across South-Asia
• Electricity sector regulators

• Study visits
• UFG / Line Losses Benchmarks
• Human resource cost benchmarks
• Complaint redressal mechanism
• Review of Tariff Mechanism
• Legal framework