The government is considering a Rs. 46 billion security plan involving 14 dedicated wings to protect gas pipelines and oil and gas exploration operations in Khyber Pakhtunkhwa and Balochistan.
The proposal follows around 23 sabotage incidents over the past two years involving the Shewa and Bettani pipelines and Sui Northern Gas Pipelines Limited’s main northern network. The attacks caused an estimated loss of 7,624 million cubic feet of gas, equivalent to about 25 LNG cargoes. The financial loss was estimated at Rs. 12.7 billion at a local gas price of $6 per mmBtu and Rs. 27.7 billion at an RLNG price of $13 per mmBtu.
The government estimates that a complete suspension of northern gas supplies would force SNGPL to rely more heavily on expensive RLNG, adding Rs. 97 billion to its annual revenue requirement. This could raise the utility’s prescribed gas price by about Rs. 333 per mmBtu, from Rs. 1,719 to Rs. 2,052 per mmBtu during the current financial year.
The northern network currently receives 556 mmcfd from indigenous sources, including 146 mmcfd from recent discoveries at Mami Khel, Shewa and Spinwam in Waziristan Block, Bettani under the Wali Exploration Licence and Koi Palak in the Baska North Block.
The government’s proposed security mechanism has two components. Four dedicated wings would protect SNGPL pipelines and northern gas sources, with their establishment estimated to cost Rs. 12 billion and annual recurring expenses of Rs. 4 billion. After accounting for two wings already deployed, the additional requirement for two more wings is estimated at Rs. 8.969 billion, with an annual recurring cost of Rs. 2 billion.
Another 10 regular wings would be established under a CPEC style security framework to protect exploration, drilling, wellhead, processing and other E&P activities.
Four wings would be deployed in Khyber Pakhtunkhwa and six in Balochistan. Their establishment cost is estimated at Rs. 30 billion, with Rs. 12 billion allocated for Khyber Pakhtunkhwa and Rs. 18 billion for Balochistan.
The Rs. 30 billion cost of the E&P security mechanism is proposed to be shared equally by E&P companies, the federal government and the respective provincial governments, with each contributing Rs. 10 billion. The annual recurring cost of Rs. 10 billion would be borne entirely by E&P companies, with no financing cost, prescribed gas price impact or consumer pass through under the proposed arrangement.
Existing security arrangements include about 1,513 personnel protecting SNGPL pipelines at an annual cost of around Rs. 3 billion and another 1,828 personnel deployed by E&P companies at a cost of about Rs. 2.174 billion a year.
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