ISLAMABAD: A planned five billion dollar investment in Pakistan’s oil and gas exploration sector has entered a state of uncertainty after the federal government extended the off the grid levy to third party gas suppliers, a move industry stakeholders say has severely undermined the commercial viability of private gas distribution.
The levy has now been imposed on third party companies supplying gas to industrial consumers, including the Universal Gas Distribution Company, even though these firms procure gas through competitive auctions from exploration and production companies at market based prices. Industry representatives argue that this policy change has erased the limited margins available to private suppliers.
UGDC Chief Executive Officer Ghiyas Abdullah Paracha confirmed that the company has effectively been reduced to a levy collection agent rather than an independent gas distributor. He said the mechanism for levy collection will be detailed in an upcoming Presidential Ordinance, adding that the decision has removed any competitive edge third party suppliers previously had in the gas market.
The off the grid levy was initially introduced under an IMF backed framework and applied to Sui gas companies for supplying captive power plants. The levy has since risen in phases and is scheduled to increase further in 2026, pushing effective gas prices for industrial users to levels widely considered unsustainable for export oriented industries.
As a result, industrial gas consumption has declined sharply, particularly in Punjab and Sindh, while more than one hundred industrial units have reportedly shut down due to high energy costs and unreliable grid electricity. Industry sources link the downturn directly to rising gas prices and policy uncertainty.
Under the amended 2012 E and P Policy, private distributors were allowed to purchase a portion of gas through auctions, improving cash flows for upstream companies and triggering investment commitments worth five billion dollars. Stakeholders now warn that extending the levy to third party suppliers has dismantled this framework, threatening future exploration investment, worsening the energy crisis and further weakening Pakistan’s export competitiveness.
