by Abdullah Azeez Zia
Natural gas consumption in Pakistan is more a function of supply than demand. Whenever new gas discoveries are made and added to the system, the gas distribution Companies have found ready buyers. With the increased E&P activity in the country, along with the increased production from the existing gas fields, gas consumption is likely to grow considerably primarily on demand from the power sector.
The share of natural gas in Pakistan’s energy supply mix has increased from 41% to 51%, whereas that of oil has decreased from 43% to 29% during the last three years. The Company has its gas distribution network in 831 different towns and villages of Punjab and NWFP. As on June 30, 2006, the total length of distribution network of SNGPL stands at 46,964 Kms. Pakistan’s dependence on gas is significantly higher with gas accounting for almost 43% of total energy supplies. The country has been relying on oil and gas for majority of its energy needs, with both constituting almost 80% of the total energy supplies in the country. While indigenous gas supply is sufficient to cater to domestic demand, it has been meeting the majority of its oil requirements through imports.
While it is generally expected that Pakistan’s gas reserves of 26.1 TCF of gas will last for 20-25 years, this is based on the current annual consumption rate of almost 1TCF. With the increased consumption by the power sector being eyed, Pakistan is likely to face a shortfall in gas supply much earlier than that. According to a study, if gas demand grows moderately, along with moderate additions to supply, Pakistan could face a shortage of gas of 439mmcfd by 2010.
Pakistan has two integrated gas transmission and distribution companies, which buy gas from the E&P companies, and then sell it to retailers. The two gas utilities have distinct franchise areas, with Sui Southern Gas Company Limited supplying gas to consumers in the Balochistan and Sindh provinces of Pakistan, while Sui Northern Gas Pipeline Company Limited supplies gas to the provinces of Punjab and NWFP. The pipeline network for transmission and distribution of gas is owned by the two gas utilities in their specific franchise areas.
The total gas sale for the year ended 2006 is 571,481 MMCF showing an increase of 6.40% over the previous year. The sector-wise break-up of gas sales indicates 32% gas sales to the Power Sector, 9% Fertilizer, 2% Cement, 34% General Industries and 23% to the Domestic and Commercial sectors.
211,130 new customers were added, raising the total to 2,688,965. The Company is committed to make natural gas available to maximum prospective consumers subject to its financial position, technical capabilities and availability of natural gas.
Basically an operational outfit, the Company handles the entire operation of a lengthy network of high-pressure gas lines comprising 6,195 KM in length, varying from 6" to 36" of diameter in accordance with the Mineral Gas Safety Rules, Oil & Gas Regulatory Authority (OGRA) Regulations and International Gas Transmission Industry’s standards.
The Company’s business strategy is to maximize sale of gas by entering into new areas through development/expansion of its infrastructure. In accordance with the policy of Government of Pakistan, the Company has focused on country’s economic revival by out reaching industries for gas supply. During the last fiscal year, the Company has provided a record number of 531 industrial gas connections resulting in displacement of imported liquid fuels to save precious foreign exchange.
The Management of the Company is fully cognizant of the fact that the buried pipelines network is the most valuable asset of the Company. The Management’s thrust has been to increase the protection level and the longevity of these pipelines. The corrosion control department has taken a variety of new initiatives to improve their cathodic protection levels and provided allied facilities. At the core of this endeavor is the program to shift from conventional ways of corrosion monitoring, to modern practices being adopted worldwide. Quality assurance process is continuously carried out to safeguard the Company’s assets.
SNGPL, as contractor, carried out construction of pipelines 8" dia, 20 Km Badar Gas Field to Qadirpur Field. Similarly an EPC (Engineering, Procurement & Construction) contract was successfully executed for M/s. MOL Pakistan in the shape of 10" dia, 8.75 Km Makori – Kharrapa gas pipeline.
During the year, the Company successfully completed various mega projects like gas supply to Murree, Kot Radha Kishan, Lilla town (through CNG) and many other projects in different regions of Punjab and NWFP. The Company has planned to undertake the project of gas supply to various Southern Districts of NWFP (with estimated cost of Rs.2.1 billion) viz. Hangu, Karak, Lakki, Bannu, Dera Ismail Khan, Tank and Southern Districts of Punjab (with estimated cost of Rs.3.7 billion) viz. Hasilpur, Chishtian Mandi, Bahawalnagar, Burewala, Pakpattan, Haroonabad, Duniapur, Karorpakka, Vehari, Tiba Sultan, Khairpur Tammawali, Yazman, Minchinabad and Fort Abbas through construction of Transmission lines of 315 Km and 115 Km, respectively and Distribution supply mains of 460 Kms.
There were six major ruptures of main pipelines ranging from 16"dia to 30"dia in Balochistan during the year due to sabotage activities. All these incidents were satisfactorily handled and the gas supply was restored within shortest possible time. The Management effectively carried out peak winter load management, without major curtailment of supply of gas to industrial consumers.
DEVELOPMENT and FUTURE PROJECTS
The Company is planning to take up Project-IX (573 Km, 12" 36" dia, pipelines). The project will be executed in two phases. The Phase-I (Advance Action Plan P-IX) includes the construction of 140 Km, 24" diameter Gurguri – Kohat – Nowshera line. The basic objective of Project-IX is to absorb additional gas available from existing and new sources viz Gurguri, Salsabeel, Haseeb and gas sources of Potohar region and enhancement of capacity down stream of Multan to alleviate the acute shortage of natural gas and improve pressure drop position, through system up-gradation with loopline and Compression facilities enhancement. This Project will revolutionize the economic scenario of NWFP by making the province self sufficient in terms of its energy requirements. This mega project will increase the asset base of the Company thus bringing profit to all the shareholders.
FUNDAMENTALS
The Company earned Rs 5,119,060 thousand pre tax profit in the financial year ended June 2006, which is 20.12% higher than the last year. The Revenue from sales was Rs 105,851,114 thousand during the year, which is 26.95% higher than the previous year. This year the Company has taken a tax refund of Rs 882,183 thousand from the tax authority on different accounts. Company’s current ratio has also improved from 1.22 to 1.31. Furthermore, the Company has tried its best to optimize utilization of all its available resources to the maximum level resulting in improvement of the inventory turnover ratio from 228.85 to 232.24 whereas the fixed assets turnover ratio has also considerably improved from 2.09 to 2.48. The Company has taken effective measures to recover its receivables. The number of days sales in receivable account has been reduced from 52 to 43 days. All ratios and financial results are very positive and will certainly attribute to build up the stakeholders’ confidence.
The earnings per share for the year ended June 30, 2006 is Rs 7.46 The Company was granted a license in the year 2003, to operate within specified areas and to undertake the business of gas transmission and distribution. Although a fixed return of 17.5% has been prescribed under World Bank loan covenants, yet the Regulator has been authorized to prescribe prices to allow the final revenue, to the licensee, after certain adjustments. In this regard the Regulator has reduced the total return of 17.5% by Rs 1,103 million for certain expenses including UFG being over and above the prescribed target of 5.85%. These deductions resulted in reduction of EPS by Rupee 1.46 for the financial year 2005-06.
TECHNICALS
Sui Northern closed up at Rs.64.00. Volume was 68% below average (consolidating) and Bollinger Bands were 35% narrower than normal. The share is currently 9.7% below its 200-period moving average and is in an upward trend. Volatility is high as compared to the average volatility over the last 10 periods. Our volume indicators reflect volume flowing into and out of SNGPL at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on the Company and have had this outlook for the last 0 periods.
Short-term traders should pay closer attention to intraday levels while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the chart, currently becoming oversold.
For comments and suggestions: Email: abdullahazeez@hotmail.com
http://www.nation.com.pk/daily/sep-2007/24/bnews9.php |
