February 17, 2022 (MLN): Finally, the long-awaited legislation to implement the weighted average cost of gas (WACOG) has been approved by the Senate despite the strong protest of opposition.
While informing about this recent development through his official Twitter account Hammad Azhar, Minister of Energy said, “It is a historic and long-pending reform that will ensure the energy security of Pakistan. We are now able to embark upon the reform of the gas pricing structure, remove anomalies and enhance supplies of imported gas.”
This reform is as significant as the approval of the Indicative Generation Capacity Expansion Plan (IGCEP) model for power purchase a couple of months ago. Both historic reforms in the power and petroleum sector have been carried out by the incumbent govt in the last six months, he added.
WACOG is calculated as the total cost of all-natural gas purchased during a base period divided by either the total quantity purchased.
This development will ensure gas availability at a reasonable rate as it will allow local gas and RLNG to be pooled in while determining the weighted average cost for gas.
Owing to the said development, the export industry will experience a notable reduction on the cost front.
Musadaq Zulqarnain, CEO Interloop termed this decision a step in the right direction which can bring countrywide parity in gas prices and thus improve the supply of gas by the additional import of LNG. This can benefit on a year-long basis only after laying of North-South Gas Pipe Line.
“Another step needed is to gradually end the highly depressed price of Feed Gas to Fertiliser plants and instead provide direct subsidies to Farmers. A study must be made whether importing additional LNG is better or Urea from the International market,” he emphasized.
