Textile exporters in Pakistan flag potential hundreds of millions in RLNG overcharges

Pakistan’s largest textile trade body has asked the Oil and Gas Regulatory Authority (OGRA) to reopen its determination of regasified liquefied natural gas (RLNG) prices for the period from 2015 to 2022, alleging misallocation of unaccounted-for gas (UFG), lack of transparency and potential overcharging of industrial consumers running into hundreds of millions of dollars.

The All Pakistan Textile Mills Association (APTMA) said it has formally approached OGRA seeking a rehearing, primarily on the grounds of UFG misallocation and the regulator’s failure to disclose the full computation trail used in actualizing RLNG prices over the 84-month period.

APTMA estimates that around 47 million tonnes of LNG were consumed during the period under review. Using a conversion factor of one tonne of LNG equal to 52 MMBtu, the association said that even under a conservative assumption that 10 million tonnes were consumed by industrial users — in the absence of any class-wise consumption data published by OGRA — industrial usage would amount to about 520 million MMBtu.

The association argues that if industrial RLNG prices were adjusted downward by just $0.50 per MMBtu to reflect the fact that RLNG UFG was applied at “significantly higher levels”, nearly double those of system gas within the same commingled network, the implied refund would be about $260 million.

Under APTMA’s higher assumption that 17 million tonnes of LNG were consumed by industry, the same $0.50 per MMBtu correction would result in an estimated refund of roughly $442 million, even before accounting for any additional reversals arising from class-symmetric netting of recoveries and gains.

APTMA said the risk of overcharging is amplified by the large price differential between system gas and RLNG. System gas, it noted, is roughly three times cheaper than RLNG and is subject to an explicit UFG benchmark, while RLNG has no such benchmark. This, the association contends, allows inflated UFG incidence to be applied to a much higher-priced fuel.

In the case of Sui Southern Gas Co. (SSGC), APTMA said RLNG UFG has reportedly been applied in the range of 15% to 17%, a level that could translate into a value impact approaching $2 per MMBtu on RLNG prices — a cost the association described as economically devastating for industrial consumers.

The association also warned that additional refunds may be due where commercial risks from defaulted LNG cargoes were passed on to consumers instead of being absorbed by the parties contractually responsible. It further questioned whether Channel Development Cess (CDC) recoveries were transparently reconciled against actual expenditures and refunded through a publicly disclosed, cargo-wise and class-wise netting schedule.

APTMA criticized OGRA for allowing what it described as a “dual-loss construct” on a single commingled gas stream, even though RLNG and system gas flow together through the same pipelines and metering systems. The association said treating the two fuels as having separate loss profiles is a physical impossibility, likening it to claiming that one pot of water can have two boiling points or that a single river can have different evaporation rates under identical conditions.

According to APTMA, UFG is not a minor adjustment in RLNG pricing but a structural allocator that determines which consumer classes bear losses and drives retrospective billing exposure on a high-priced fuel. With no RLNG-specific UFG benchmark and no disclosed reconciliation boundary or sales-management-system (SMS) data, a single assumption can result in hundreds of millions of dollars in over-recovery or misallocation, it said.

The association argued that if RLNG is to function as a neutral, import-parity benchmark in a liberalizing gas market, it must remain ring-fenced, transparent and consistent in incidence. Introducing opaque allocator layers, it said, converts a legitimate cost pass-through into an incidence-shifting mechanism that distorts class allocation, undermines third-party access neutrality and erodes market credibility and investor confidence.

APTMA also challenged OGRA’s legal basis for retrospective recoveries, saying Section 9(2) of the OGRA Ordinance, 2002 applies only to price revisions arising from changes in wellhead or imported gas costs. It does not, the association argued, cover multi-year, allocator-sensitive actualizations or retrospective recoveries based on undisclosed records.

The alleged illegality, APTMA said, stems from OGRA’s approval of a multi-year RLNG recovery mechanism without disclosing the computation trail, allocator methodology, reconciliation boundaries or the SMS-wise data required for independent verification.