ACKNOWLEDGEMENT

I am grateful to Al mighty ALLAH who gave me all the strength, courage preservation and patience to finish my Six weeks of Internship Program at SSGC and in achieving my task fruitfully. I would like to take this opportunity to formally thank Mr. Shuja (Assistant Manager Finance), Mr. Murtaza Shaiekh (Gernal Ledger Section), Mr. Shamim & Mr. Nadeem (PayRoll Section) for providing their immense support and unwavering guidance during conduct and completion of this internship report on SSGC and it became possible for me to complete this work within short time. I would specially like to thank Mr. Shuja Shiekh (Assistant Manager Finance), for his constant support and guidance and for solving all my queries during the course of my internship. It was because of his motivating & encouraging efforts that I have been able to explore the practical world in a very professional manner and to understand different legal ordinance beyond the requirement of my internship. Last, but not the least, our fellow internees. They have been remarkable in lending me support and encouraging me in my work. A lot of people helped in one way or the other but there are a few people who deserve special mention here. I would take this opportunity to thank Farhan, Majid, Basheer & Ilyas

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ABOUT SUI SOUTHERN GAS COMPANY .........................................................INTRODUCTION .......................................................................................................... 04 HISTORY ...................................................................................................................... 05 DISTRIUTION STORES ................................................................................................. 06 MISSION ..................................................................................................................... 07 VISION ........................................................................................................................ 07 COMPANY'S OBJECTIVES ............................................................................................ 08 BUSINESS AND OPERATING CHALLENGES .................................................................. 08 CORE VALUES.............................................................................................................. 11 ORGANIZATIONAL CHART .......................................................................................... 12 SPECIAL AWARDS AND ACHIEVEMENTS ..................................................................... 13 GAS PRODUCTION OF WORLD .................................................................................... 14 FINANCIAL HIGHLIGHTS 2009 ..................................................................................... 16

GAS PURCHASE SECTION ...............................................................................RESPONSIBILITIES OF GAS PURCHASE SECTION ......................................................... 17 WORKING OF GAS PURCHASE SECTION ..................................................................... 18 GAS SALES AGREEMENT (GSA) ................................................................................... 18 INVOICES OF GAS PURCHASES.................................................................................... 19 PAYMENT OF INVOICES .............................................................................................. 19 SCHEDULES ................................................................................................................. 20 UNIFORM COST AGREEMENT ..................................................................................... 21 COMPARISON OF ACTUAL AND BUDGET.................................................................... 22 WORK DONE UNDER SUPERVISION OF MR SAHBA .................................................... 22 UFG UNACCOUNTED FOR GAS ISSUE ....................................................................... 23 OGRA .......................................................................................................................... 24 DATA FLOW DIAGRAM OF GAS PURCHASE SECTION .................................................. 25

BILL PAYMENT (NON LOCAL ORDER) .............................................................FUNCTIONS OF NLO .................................................................................................... 27 PROCEDURE OF MAKING NLO VOUCHERS ................................................................. 29 DATA FLOW OF NLO SECTION..................................................................................... 31

PAYROLL ........................................................................................................EMPLOYEE HIERARCHY ............................................................................................... 32 PROCEDURE OF PAYROLL ........................................................................................... 33 EXECUTIVE ALLOWANCE & BENEFITS ......................................................................... 34Page |2 s

UNIONIZED STAFF ALLOWANCE & BENEFITS.............................................................. 37 CHARTER OF DEMAND ......................................................................................... 37 DATA FLOW DIAGRAM OF PAYROLL SECTION ............................................................ 43 WORK DONE UNDER SUPERVISION OF MR IMRAN .................................................... 44 MEMORANDUM AGAINST GOVERNMENT AUDITOR QUERY REGARDING OVERTIME ........... 45 ISSUES CONCERNING PAYROLL DEPARTMENT ........................................................... 46

CAPITAL BUDGET ...........................................................................................BUDGET PHASE ........................................................................................................... 48 PREPERATION OF CAPITAL BUDGET ........................................................................... 49 WORKING OF CAPITAL BUDGET QURIES IN ORACLE................................................... 55

RECOMMENDATIONS................................................................................ 57 APPENDIX A ................................................................................................... APPENDIX B ................................................................................................... APPENDIX C ................................................................................................... APPENDIX D ................................................................................................... MY RESUME...................................................................................................

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Sui Southern Gas Company (SSGC) is Pakistan's leading integrated gas Company. The company is engaged in the business of transmission and distribution of natural gas besides construction of high pressure transmission and low pressure distribution systems. Sui Southern Gas Company Limited (the Company) is Pakistans leading integrated gas company having an exclusive distribution and Sales license in the provinces of Sindh and Balochistan. The Companys core business is to buy natural gas in bulk from E&P companies, transmit it to load centres over its high pressure transmission system, distribute and sell it to its customers through its supply network. The transmission system of the Company extends from Sui in Balochistan to Karachi in Sindh comprising 2,942 Km of high pressure pipeline ranging from 12 - 24" in diameter. The distribution network of over 30,000 Km covers 1200 towns and 930 villages in Sindh and Balochistan. The Company sold 442,146,085 million cubic feet (MCF) of natural gas during the year 2008-2009 to about 2.155 million industrial, commercial and domestic consumers. The Company also owns and operates the only gas meter manufacturing plant in the country, under an agreement with Schlumberger Industries-France. The plant has an annual production capacity of over 550,150 domestic meters. SSGC is also examining the feasibility of installing a pilot project of 500 numbers of Radio Frequency type and 500 numbers of prepayment type meters manufactured by ACTARIS, a French Company. Following the successful testlaunch of 1,000 imported prepaid meters in 2004-05, the company is proceeding aggressively to set up more pilot projects before rolling out these meters at a faster rate in 2005-06. The Company has achieved another milestone at the meter plant. It has obtained ISO 9001: 2000 certification. The Company is a public limited company listed on the Karachi, Lahore and Islamabad Stock Exchanges with more than 70% direct shareholding by Government of Pakistan (GOP). It has an authorised capital of Rs.10 billion, out of which Rs. 6.7 billion is issued and fully paid up and is managed by an autonomous Board of Directors having overall control. Presently, SSGCs Board has 14 members drawn both from public and private sectors. The Managing Director/Chief Executive is nominated by GOP and has been delegated with such powers by the Board of Directors as are necessary to effectively conduct the business of the Company.Page |4 s

SSGC in its present form was created on March 30, 1989, following a series of mergers of three pioneering energy companies: Sui Gas Transmission Company, Karachi Gas Company, and Indus Gas Company. Sui Gas Transmission Company Limited was formed in 1954 with the primary responsibility of gas purification at the Sui field in Baluchistan and its transmission to the consumption centres at Karachi. Two distribution companies were established in 1955 and were responsible for the distribution of gas to consumers in Karachi and in other towns along the route of the transmission pipeline between Sui and Karachi. In 1985, these two distribution companies were merged to form Southern Gas Company Limited and later, in 1989, Southern Gas Company Limited and Sui Gas Transmission Company Limited were merged to form the Sui Southern Gas Company Limited. Organized into regional offices, SSGC also owns and operates the only gas-meter manufacturing plant in the country, under an agreement with Actaris (a former division of Schlumberger). Today, SSGCs infrastructure supports more than million customers. Domestic consumers comprise the overwhelming majority of those users (98.8 percent), with commercial (1.1 percent) and industrial (0.2 percent) customers representing very small segments of its constituency.

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The SSGC vision was not without its challenges. SSGC cuts across many industries and has many diverse stakeholders. As a public sector organizationwith the Pakistani government holding more than 70 percent ownershipSSGC has social as well as policy-based responsibilities. Although SSGCs primary mandate is to provide utility services to citizens, it also is charged with creating jobs, continuously improving the skills of its employees, helping the Pakistani government fulfill its vision for citizen quality of life and Business productivity, andnot leastrunning an efficient enterprise to ensure that oil and gas consumers get access to the countrys energy resources at affordable rates. Moreover, as a Business within the oil and gas industry, SSGC must efficiently manage the purchase of gas from a significant number of explorations and production (E&P) companies, which operate the gas fields. Furthermore SSGC must operate as a successful commercial enterprise in the oil/gas sector. This means being profitable and self-funded rather than government subsidized. Finally, as a utility company, SSGC is responsible for the cost-effective distribution of high-quality natural gas to industrial, commercial, and household consumers in its operating regions while providing stellar customer service

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The Company aims to supply natural gas wherever there is sufficient load to justify the cost of infrastructure. In many places the gas network is being expanded to meet economic and social requirements through active funding support from the Federal and Provincial governments. In 2003, the Company launched a comprehensive five-year gas network development and expansion plan to connect hundreds of small towns and villages in remote areas of Sindh and Baluchistan, which currently are deprived of piped natural gas. Every year, the Company adds nearly 66,000 new customers (industrial, commercial & domestic) to its customer base and lays hundreds of kilometres of transmission pipelines and distribution network and installs other facilities such as metering/ billing stations in its system using its staff of technically qualified and skilled personnel.

Even as a government monopoly, SSGC was facing many of the same challenges that commercial enterprises around the world must confront every day. In particular, SSGC was struggling to cope with two difficult but common situations. First, because the organization had been created through the merger of three companiestwo from the public sector and one a commercial, multinational enterprisethree uniquely distinct cultures needed to come together if the organization as a whole was to function smoothly and productively. The second challenge was technological. SSGCs legacy platforman aging mix of standalone databases and Business applications from different vendorswas not integrated and lacked the scalability SSGC needed to support its mission. Because these legacy systems were based on obsolete technology, they were inordinately costly to maintain. Moreover, there were significant datacompatibility issues arising from soloed systems thatPage |8 s

impeded the organizations ability to disseminate accurate and consistent information throughout its operations. The challenges that arose from these two situationscultural and technicalfell into the following categories: marketing, sales, customer service, product/service management, asset management, regulatory compliance/quality, supply chain, analytics, financials, human resources, and policy. MARKETING: Due to the fragmented nature of its technology infrastructure, SSGC lacked a holistic view of its customers. This limited SSGCs ability to market new products and services effectively and also prevented it from gathering sufficient intelligence to make effective decisions about pricing, new services, and other strategic moves. SALES: The same lack of visibility into operations created delays in signing up new customers and booking new orders. Additionally, it was difficult for the organization to access timely and accurate data on credit evaluations. This impacted SSGCs ability to provide quotes to new customers and to commit to service-delivery dates for its field resources. CUSTOMER SERVICE: Because interdepartmental systems were not integrated and there was no centralized customer database, the firm took unacceptably long to respond to customers queries. It also lacked the capability to quickly create field-service orders and dispatch technicians in a timely manner. Moreover, because it was adding more than 80,000 new customers annually, SSGC faced a number of critical Business challenges related to metering and billing. Standalone, soloed applications and databases hampered its ability to consistently and accurately generate customer billing, resulting in numerous customer errors and complaints. PRODUCT/SERVICE MANAGEMENT: This same lack of systems integration made it difficult to gather sufficient intelligence to create innovative new products and services. ASSET MANAGEMENT: SSGCs records of its assets existed mostly on paper, and processes to manage those assets were mostly manual. In addition, the organizations tribal knowledge about asset management had never been documented, but instead resided within the expertise of individual employees. REGULATORY COMPLIANCE/QUALITY: Regulatory reporting was performed manually and there were no controls ensuring the accuracy of the data used to generate reports.

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SUPPLY CHAIN: Excess inventory tied up valuable capital, preventing SSGC from being able to invest in much-needed infrastructure expansion. Additionally, sourcing took an inordinate amount of timeas long as nine monthswhich also limited SSGCs ability to make capital expenditures in other key areas. ANALYTICS: SSGC had put few metrics in place for monitoring integrated process performance and had no discernable starting point from which to benchmark any kind of progress. FINANCIALS: Because SSGC lacked a sophisticated financial system, it took as long as two months to close its books every quarter. This created a bottleneck for managers seeking timely information on organizational performance. HUMAN RESOURCES: Employees were not held accountable for fulfilling their job duties. SSGCs nonaggressive personnel-management style failed to inspire employees to innovate. Additionally, there were no formal programs to develop their skills and no attempt to implement a performance-based reward system. POLICY: Global regulatory requirements put pressure on SSGC to produce auditable performance and quality records that showed it was financially self-sustaining. Yet inefficient operations meant that it was surviving financially, primarily through higher tariffs and cross-subsidies from other public sector agencies. SSGC needed to establish and rigorously adhere to policies that dictated its financial autonomy.

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INTEGRITY Keep Company's Interest above self. Acts in ethical manner. Promote ethical business environment. Take effective actions if observers unethical behaviour or situation. Seen & known to be honest. Lives within means. Intellectually hones. EXCELLENCE Makes positive contribution towards the achievement of SSGC's Vision. Strives for Continuous improvement. Respond effectively to customer needs. Takes timely and Quality decisions. TEAMWORK Builds strong relationships within across functions. Works well with all type of Peoples and corporate with others. Solicits and share ideas/best practice with others. Supports the achievements of Company/team goals. Contributes to team effectiveness using people's different skills and styles. Arrives at constructive solutions while maintaining Positive working relationships. Demonstrates sensitivity. TRANSPARENCY Promotes open environment. Displays openness and consistency in applying policies & Procedures. Respects dissent and resolves conflicts fairly. CREATIVITY Comes up with new ideas. Encourages innovation. Promotes modified approaches. Convert Ideas into actions. RESPONSIBILITY TO STAKEHOLDERS Stays abreast of change in operating environment that impacts our business (i.e. markets, competitors, Technology, customers, suppliers, employees, regulatory, political and public). Create solutions to make Customer needs. Develops colleagues and team members to improve their skills and performance. Ensure Optimum utilization of resources. Balances short term and long term priorities to maximize on results. Ensures compliance of law.

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ESRI which is the worlds leading GIS software application company has recognized SSGC s outstanding work in the GIS field and SSGC has been selected for a Special Achievement Award in GIS out of 100,000 user sites worldwide. SSGC has been recognized by Oracle in a worldwide forum as a flagship for technology applications and best business practices. ICAP/ICMAP Corporate Award for Golden Jubilee Annual Report Best in public sector companies. Obtaining ISO 9001 and ISO 14001 and OHSAS 18001 certification, first utility company in the oil and gas sector. Meter manufacturing capacity increased from 293,000 to 500,000 fully meeting increased requirements of SNGPL and SSGC. Obtained Environment Excellence Award 2004 and 2005 from National Forum for Environment and Health. Obtained National Excellence Award 2005 and Excellence Award for best HSE Practices from Employees Federation of Pakistan. SSGC is the first utility in Pakistan to undertake unique implementation of an integrated and comprehensive Customer Information System (CIS), using world-class software application of SPL World Group. Recognizing these efforts, made mostly by SSGC itself, Mr. Munawar Baseer Ahmed Managing Director of SSGC was specially invited as Key Note Speaker to the SPL User Conference held in November 2006 in USA. SSGC has been selected by Disease Management Leadership Association (DMAA), USA to receive 2006 Disease Management Leadership Award for Outstanding Leadership in Emerging Health Needs and has been invited to present a paper in Disease Management Leadership Forum 2006 organized by DMAA

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(Refer to APPENDEX A for Complete List)P a g e | 14 s

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2009 - Rupees in "000"

Total Equity Non-Current Liabilities Current Liabilities Total Liabilities Total Equity & Liabilities ASSETS Non-Current Assets Current Assets Total Assets P&L Gas Sales Cost of Gas Operating Expenses Transmission & Distribution Administrative expense Other Total operating expenses Net Income no of shares EPS Customers (in numbers) Industrial Commercial Domestic UFG Loss

9,683,594 31,619,203 59,251,203 90,870,406 100,554,000

60% 59% 113% 86% 82%

16,147,516 53,808,874 52,391,734 106,200,608 122,348,124

39,521,329 61,032,671 100,554,000

50% 141% 82%

79,211,266 43,136,858 122,348,124

118,585,244 102,388,858

74% 68%

160,714,737 151,337,319

6,900,794 1,564,628 2,390,071 10,855,493 257,489,000 671,174,331 0.38 5,953 52,242 3,358,439 3,416,634 2,871,700

46% 91% 80% 55% 28% 122% 23% 157% 221% 158% 159% 61%

15,011,529 1,723,200 2,975,305 19,710,034 930,567,000 549,105,339 1.69 3,801 23,606 2,127,593 2,155,000 4,601,150 P a g e | 16 s

GAS PURCHASE (SECTION)

RESPONSIBILITIES OF GAS PURCHASE SECTIONFollowing are the responsibilities of Gas Purchase Section: 1. To receive the invoices of gas purchase every month from the field operators which include joint ventures 2. Memo along with original invoice is send to measurement department through transmission for verification of bills and the data is punched in oracle. 3. According to the gas sales agreement, payment for bills are made to local companies in local currencies whereas the payment to foreign companies is made according to the procedure i.e. M form with verified original copy of bills is send to State Bank of Pakistan for remittance approval. After approval from SBP, the bills are paid in foreign currency from SSGCs bank to beneficiary bank. 4. 5. 6. 7. 8. 9. To prepare schedules of Cost of Gas and the schedules for Creditors quarterly. To do Reconciliation between the records of gas supplier and the records of SSGC. To maintain Purchase Register in respect of Sales tax. To raise Inward Note monthly in respect of uniform cost. To reconcile the GSC-1 statement. Preparation of Revenue Budget of gas purchases.

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WORKING OF GAS PURCHASEThe Sui Southern Gas Company Limited is engaged in the business of gas transmission and distribution in Sindh and Balochistan. The company receives gas from different oil and gas fields located in Sindh and Balochistan. The natural gas received from these fields is transmitted to different cities and towns of Sindh and Balochistan and then the gas is distributed to consumers. There are total 15 fields and 4 towns controlled by Gas Purchase section. Each field has a operator and under that operator there are several other joint ventures who supply the gas according to a certain limit allowed to them. The operator has direct contact with SSGC whereas other joint ventures contact to the company through the operator and their invoices also come under the letter head of the operator.GAS PURCHASE FY 2008-09 Volume(MMCF) Naimat Basal 152,525 Bhit 116,713 Badin 73,673 Zamzama 59,104 Sui/Kandhkot 39,306 Sawan 33,920 Miano 25,995 Kadanwari 15,461 Bobi 5,305 Mazarani 4,000 Latif/Daru/Sari Hundi/Mari 2,564 SNGPL(Ghotki.Rustam/Ubaro) 853 529,419

GAS SALES AGREEMENT (GSA)The gas sale and purchase between the seller and buyer is governed by the terms of Gas Sales Agreement (GSA), which is signed by the operators and their joint venture partners as Sellers and SSGC as Buyer and the Government of Pakistan. Besides operations, legal and other commitments, the GSA also provides payment procedures. The operator of the field in accordance with the GSA prepares monthly gas sales invoices and sends the same to SSGC on behalf of all the seller partners. The payment of gas bills and sales tax invoices is made to each seller member in accordance with their shareholding and percentage of gas they have

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supplied to SSGC. The excise duty on total volume of gas purchased from such field is paid only to the field operator. The payment of gas bills is to be made within 30 days of receiving invoice.

INVOICES OF GAS PURCHASESThe invoices of gas purchase mainly include three elements which are as follows: GAS CHARGES Gas charges are the notified gas wellhead price per MMBTU. The gas prices are regulated by OGRA and these prices are generally applicable for a period of six months. (See Appendix A for Well head prices) EXCISE DUTY Excise duty is charged on the volume of gas produced during the period. SSGC pay Excise Duty to the operater who actually discharges this liability on behalf of the joint venture. Excise duty of 5.09/MMBTU is changed to 10Rs/MMBTU from july1st onwards. (See Appendix A for Dawn Article) SALES TAX: Sales tax is applicable at the rate specified by the government on the total value of supplies. The prevailing rate of sales tax has also increased from 16% to 17% effective july31 2010. Sales tax is paid individually to each company in case of joint venture

PAYMENT OF INVOICESRECEIVE INVOICE FROM THE FIELD: At the end of each month invoices are received from the operater of the fields containing the bills of previous month based on total quantity of gas supplied to SSGC. VERIFICATION OF BILLS: The Measurement department checks the metering of gas purchased by the company. The invoices received from different fields are immediately sent to Measurement department in order to verify the total number of MMBTU received by SSGC from a certain company. The measurement department sends back the verified invoices with in ten days so that the Gas Purchases Section gets sufficient time to process payments well in time. The delayed payments bear Late Payment Surcharge (LPS) at the rate applicable as per provisions of respective GSA. PUNCHING OF DATA: Soon after sending the bills to Measurement Department, the data is punched in A/P module of Oracle where new batch is created and all the relevant information regarding the bills are punched. PAYMENT OF BILLS: After receiving the verified copy of the bills from Measurement Department, payment to local and foreign suppliers is made on following procedure 1. LOCAL SUPPLIERP a g e | 19 s

The payments to local gas companies are generally made into Pak Rupees. The invoices duly verified by the Measurement department are then send to gas purchase department. The gas purchase section processes these invoices and makes payments in accordance with the provisions of the GSA. 2. FOREIGN SUPPLIER The payments to foreign gas companies are made in foreign currency and before doing payment to foreign suppliers, M form along with verified original copy of bills is send to State Bank of Pakistan (SBP) for remittance approval. After approval from SBP, the bills are paid in foreign currency from SSGCs bank (any commercial bank) to beneficiary bank of the supplier.

SCHEDULESFollowing schedules are created by gas purchase section: RECONCILIATION: Monthly reconciliation of gas volume is carried out in which field wise gas volume are reconcile with the gas delivered for distribution, consume internally and transmission loss/gain. SCHEDULES OF LEDGER ACCOUNTS: Monthly / quarterly / half yearly and annual schedules are prepared for each company. Copies of these schedules are submitted to the Ledger Section for record. These schedules show details of transactions recorded into the ledger accounts and in case of any error or wrong postings, if detected, the same is rectified by passing an adjusting entry. SCHEDULE FOR ACCOUNTS: These schedules show month-wise and field-wise details of volume and value of gas purchased during the period with necessary effect of opening and closing balance in the pipelines. These schedules are prepared quarterly, half-yearly and annual after closing of accounts and a copy is submitted to the Ledger Section SCHEDULE OF FIELD-WISE COST OF GAS: These schedules show the field-wise detail of gas purchases and contain the following information of gas bills. 1. Date and Month 2. Volume of Gas purchase both in MCF and MMBTU 3. Gas Price amount of Gas Purchase 4. Excise Duty and Sales Tax 5. Total amount of gas bills (wellhead, excise duty and sales tax) Due date and date of payment

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UNIFORM COST AGREEMENTThe Government of Pakistan has decided as for the national interest that there should be a uniform price of gas for consumers throughout the country and pursuant to such decision the Government of Pakistan has issued the following policy guideline: In order to ensure the uniform consumer gas prices all over the country, the cost of gas purchased should be worked out for both the gas companies (SSGC & SNGPL) as an overall average basis in such a manner that the input cost of gas for both the companies becomes uniform. The OGRA should workout the revenue requirement of both the gas companies. The OGRA should also develop the mechanics for intercompany adjustment of input cost of gas through a formal agreement between the two gas companies. SSGC & SNGPL are required to send their input cost sheet showing the monthly cost of gas purchased and MMBTU for the OGRA to calculate weighted price The party with the lower weighted average cost of gas pays to the party with higher weighted average cost of gas.

WORKING OF AMOUNT TO BE PAID BY SSGC TO SNGP

*This is an assumed example

SSGC SNGP Gas Purchase Price "Rs" 705,040,000 677,810,000 Less: (Original Quantity MMBTU X Weightage Average Price) (721,072,309) (661,777,691) (16,032,309) 16,032,309 SSGC will pay 16,032,309 Rs to SNGP for the purpose of UNIFORMITY OF PRICE

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COMPARISON OF ACTUAL AND BUDGETMonthly statement of gas purchase is prepared to show the comparison of data relating to actual gas purchases with budget. The statement gives a review of monthly gas purchases in terms of volume and value along with the daily off-take rate.

WORK DONE UNDER SUPERVISION OF MR SAHBAWhen fresh invoices come through courier of operators in the field, from which SSGC purchase gas, they are sent to KT Karachi terminal, (KT is the area where the transmission network is setup, all gas purchased is passed through KT, meter reads the value of gas input. Invoice are then sent to KT for verification, except 3 fields, one of which is zamzama, because the payments for those fields have to be made immediately, which leaves no time for verification, in case payment is not done fine is imposed. After receiving verification from KT, that the gas purchased mentioned in the invoice is equal to the readings of meter reading of KT terminal, invoice is then punched into oracle financial and payment voucher for invoice is printed and attached for further signatures. GST is paid in Rs, while excise duty is paid to the operator, payments are done in dollar if the operator is foreign based company. Payments to foreign companies are paid within time framework while payments to local government organizations such as OGDCL, PPL are sometimes delayed as well which give rise to LATE PAYMENT SURCHARGE Late payment surcharge if payment is made late then surcharge has to be paid to E&P companies, there is a very high amount of surcharge due on SSGC because of late payments to government organizations, which is not paid yet, because of reasons such as government organizations dealing with government holding organizations have consensus about payments issues. Surcharge is recorded in case if it is to be paid. See APPENDIX A for memorandum issued by KT terminal along with invoice and summary of invoice signed

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UFG UNACCOUNTED FOR GAS ISSUEIn order to check the efficiency of these gas utilities and to limit their line losses, government sets UFG targets for local gas companies. UFG is the term used for units, which are not billed (due to theft) or lost during the transmission of gas to the consumers. It is the difference of gas purchases and sales after adjusting internal consumption. For this, OGRA has allocated upper and lower limits. This means that if actual UFG losses will be higher than the upper limit, the entity would bear the full loss from its own profits. On the other hand, it can retain the savings in the event of performance being better than the lower target

ACTUAL UFG OGRA UFG LIMIT DIFFERENCE LOSS/GAIN

FY 2008 - 2009 7.93% 4.80% 3.13% PKR 2,817,832,000 2.817 BILLION

FY 2008 - 2009 8.05% 5.15% 2.90% PKR 4,601,150,000 4.601 BILLION

FY 2007 - 2008 6.63% 5.55% 1.08% PKR 762,000,000 0.762 BILLION

FY 2007 - 2008 8.04% 5.55% 2.49% PKR 2,711,000,000 2.711 BILLION

Historically, actual UFG losses are far above the upper targets due to system leakages and theft. Moreover, the value of UFG losses also depends upon cost of gas, as higher the cost of gas higher will be the value of loss units. That means whenever gas prices increases, probability of UFG losses to rise increases. According to fiscal year 2009 detailed accounts, both SSGC and SNGP posted combined UFG losses of Rs7.4 billion. SSGCs actual UFG losses stood at 7.9 per cent (target of 5.15 per cent) to Rs2.8 billion whereas SNGPs actual UFG losses were higher at 8.1 per cent (target of 5.15 per cent) to Rs4.6 billion. Their profits, on the other hand stood at Rs257 million (Earning per Share of Rs0.4) and Rs930 million (Earning per Shares of Rs1.7), respectively Sui Southern Gas Company (SSGC) plans to spend Rs24 billion over the next five years to replace corroded pipelines, which leak large quantity of gas, a top company official said (Source: The NEWS) The World Bank (WB) is in final negotiations with the Sui Southern Gas Company (SSGC) for providing a soft loan facility of $125 million to arrest and reduce the uncontrolled Unaccounted For Gas (UFG) in the companys network (Source: Daily Times) (Refer to APPENDEX A for News Articles, UFG details for year 2008-09)

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OGRAOil and Gas Regulatory Authority (OGRA) has been set up under the Oil and Gas Regulatory Authority Ordinance dated 28th March 2002 to foster competition, increase private investment and ownership in the midstream and downstream petroleum industry, protect the public interest while respecting individual rights and provide effective and efficient regulations, OGRA works under Ministry of Petroleum, as OGRA gives advices to Ministry of Petroleum for setting wellhead and sale prices for end consumers and producers of natural gas and issue it when approved from Ministry.FUNCTION OF OGRA

1. According to the rules; Grant licensees, modify, amend, extend, suspend, review, cancel and reissue revolve or terminate any license 2. Prescribe a uniform form of accounting practices by licensee 3. Promote and observe the practices for efficiency e.g. pipeline transmission, distribution & marketing 4. Promote competition 5. Enforce compliance by licensee 6. Resolve complains 7. Prescribe fines if rules are not obeyed 8. Protect interest of stakeholders 9. Administer or establish price for those categories of products for which federal government establishes prices 10. In consultation with federal government determine a price for each licensee a reasonable rate which may be earned by such licensee 11. Oversee capital expenditure budget made by licensee of natural gas 12. Determine well head gas prices for the producers of natural gas 13. Impose excise duty, taxes, and other form of charges 14. Licensee for natural gas means licensee for transmission, distribution and sale of natural gas to retail consumers (Retail consumers means: person who buy natural gas for purpose of consumption and for resale other than CNG stations) 15. To check and ensure that the pressure in transmission and distribution pipelines are according to required pressure that is less than 300psig 16. OGRA is an independent authority it can be sue or can be sued, acquire and hold 17. Responsible for issuing sale price and minimum charges for SSGC & SNGPL to charge from their customers 18. (Refer to Appendix A for OGRA wellhead prices, sales prices)P a g e | 24 s

DATA FLOW OF GAS PURCHASE SECTION

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BILL PAYMENT LO/NLO (SECTION)To ensure timely payment of all invoices in accordance with the companys policy. To approve vouchers within limit and to send reports to management on monthly basis regarding details of invoices received , invoices processed during the month and outstanding vouchers. Maintain record of retention money deducted from invoices of suppliers and follow of long outstanding advances on monthly basisBill Payment is divided into 2 areas

1. NON LOCAL ORDER deals with emergency payments, quick payments, and very few payments against agreements or tenders 2. LOCAL ORDER payments are made against tender and properagreements

The Bills Payable Section of Finance Department is required to process the bills of services, contracts, utilities, medical, supplies, and other non-local order bills received from various departments including ditching contractors, road cutting charges, civil works, etc. The Section also processes the medical bills of headquarters. The Section is responsible to ensure that all transactions are within the authorized limits and adequately approved. Similarly the payments are made only for authorized acquisition of services, contracts, work orders, etc. and approved by competent authorities. The scope of the Section encompasses: HOW PAYMENT IS MADE TO CONTRACTORS The major portion of payment is comprised of contracts being done by SSGC.SSGC has a number of contractors like civil contractors, electrical contractors & mechanical contracts. All these contracts are dealt by project and construction department (P&C) at KT.This department receives bills from all contractors, get them verified by different authorized persons, and then finally dispatched it to Head Office. Sometimes bills are not processed at a particular time period. In this case most probably mechanical and civil contractors receive certain amount as advance. At the time of processing of bills, amount of advance is adjusted. HOW DOES THIS SECTION WORKS WITH THE MEDICAL DEPARTMENT

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All the Hospitals, OPD, Chemists, Labs, Dentists and Surgeons which are on panel in SSGS Company are also being paid their bills by sending their supporting documents along with the bills. The particular hospital or vendor sends reference letter along with hospital bill. The Medical department prepares a hospitalization summary. After that invoice is prepared by Medical department which is verified by billing doctor, Deputy Chief Medical Officer/(CMO).if the amount payable is within 50,000.If the amount is up to 500,000.the invoice is verified by SGM(MS),but if the exceeds the limit of 500,000 it is signed by MD. UTILITY BILLS Apart from all these payments, this section also make payments for all utility bills like KESC, PTCL ,Water Sewerage Board, Mobile phones Connections,& transformer stations which is being installed by SSGC Moreover all maintenance charges like computer hardware or miscellaneous payments are being processed by this department after receiving invoices from focal points 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. The documents required in both the sections are some but few are different. Bank payment voucher Check list Local purchase order Cash memo Comparative statement Work order Income tax invoice Evaluation report Approval Receiving statement

FUNCTIONS OF NLO DEPARTMENTThe core functions of the department is to make payment of bills/invoices received from various departments against the following expenses. Invoices are required to be verified and approved from the authorize person of the relevant department ROAD CUTTING CHARGES SSGC is required to pay road-cutting charges to authorities like KDA, KMC, City governments and other authorities for repairing roads according to invoices submitted by them, it is to be noted that there is no agreement in place with such authorities. Distribution department sends invoices to NLO in this regard. However, rates are negotiated and approved by GM Distribution/DMDP a g e | 27 s

DITICHING CHARGES There are pre-qualified contractors for ditching on SSGC panel and company pay them according to approved rates of the company. NLO retains 10% of the invoice from the contractors as retention money and refund such retention money after 1 year. NLO also maintains record of retention money deducted from their invoices and ensures their timely refund. Distribution department sends invoices to NLO in this regard WAY LEAVE RENTALS (WLR) Way leave rentals paid to authorities including government for utilizing their land for gas pipelines. The staff has informed us that some old agreements in place, made between SSGC and such authorities for way leave rentals. Currently SSGC is not paying WLR to all authorities as are not receiving invoices from them. However, provision is being made on the basis of such agreements. BILL DISTRIBUTION EXPENSES Contractors have been retained by SSGC for distribution of bills. The approved list of contractors maintained by billing department. Billing department after verification of bills with approved rates and approval of authorized person send invoices to NLO for payment. PETROL & LUBRICANTS There are petrol pumps on panel of SSGC. All departments are required to keep record of their employees for petrol as per their entitlement and requirement and send bills after verification and approval from authorized personnel to NLO for payment METER READING CHARGES There are approved contractors for meter reading. Billing department send invoices to NLO after verification and approval from authorized personnel to NLO for payment. Approved list of contractors is maintained by billing department REPAIR & MAINTENANCE OF VEHICLES There is no approved list of workshops for repair and maintenance of motor vehicle. However relevant department sends invoices after verification and approval from authorized personnel to NLO for payment MEDICAL EXPENSES/BILLS

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Medical department of SSGC issue reference slip to patient. Patients submits reference slip to doctor/laboratories/hospitals/medical shops then they send invoices supported with reference slip to medical department. After verification and cross-refer with their own record and approval of authorized person, medicals department send invoices to NLO for payment. There are approved doctors/hospitals laborites and medical stores on SSGC panel COURIER CHARGES Departments are required to send their own bill of courier service to NLO for payment after verification and approval from the authorized personnel AUTO PARTS Departments are required to send their own bill to NLOF for payment after verification and approval from the authorized personnel CONSTRUCTION EXPENSES The approved list of contractors is maintained by procurement department. Billing department after verification of invoices with approved rates and after approval of authorized person sends bills to NLO for payment. NLO on instruction of relevant department may retain some money of invoice as retention money if provided in agreement/contract. Documents required to NLO for payment are 1. Deviation order 2. Work contract 3. Certificate of final bill 4. Tender evaluation report and summary of work completion certificate

PROCEDURE OF NLO PAYMENT VOUCHERS1. Receptionist receives different invoices, it stamps them with date received by finance department, Mr. saleem receptionist then send invoices to particular people concerned to the type of invoices, see data flow diagram for more information. 2. Mr. usman is responsible for Costing of invoices, and attach a checklist showing which costs are mentioned in the invoice (see Appendix B for checklist) 3. Staff ensures that the invoices are verified and approved by the authorized person of the relevant department and applicable rated have been applied and deduct income accordingly and feedP a g e | 29 s

invoice into system into system to generate bank payment voucher in yellow color paper, which is attached to the invoice 4. The bank payment voucher along with supported documents send back for checking and further submission for approval 5. Checks that the voucher has been posted properly and ensures that income tax income tax is being deducted and verifies approval of authorize personnel and forward bank payment voucher for approval in case discrepancies invoices are send back to the relevant department along with observation sheet for resolution of queries 6. MR Masud Faiz Approves the voucher if within his financial limits and forward it to DGM/GM finance for approval. 7. After approval of voucher and before sending to cash/bank department Mrs. seema enters voucher number and details in the register for control purposes and received acknowledgement of cash and bank on register. 8. After posting of voucher by cash and bank, copy of voucher along with cheque send to supplier, original copy retain by cash/bank for their own record and supporting documents sent to NLO for record purposes

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DATA FLOW OF NLO

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PAYROLL (SECTION)Payroll is the one of the most important section of Finance department. Its main activities includes preparation of SSGC Staff and Executives salaries every month, keeping record of all existing employees and updating in case of new appointments. There are 3 types of pays slips made in SSGC

1. EXECUTIVE (PERMANENT) EMPLOYEES 2. UNIONIZED STAFF )PERMANENT) EMPLOYEES 3. HR CONTRACT (TEMPORARY) EMPLOYEES

EMPLOYEE HIERARCHYTYPE CONTRACT STAFF UNINONZED STAFF TEMP PERMENANT GRADE NIL G-I G-II G-III G-IV G-V G-I G-II G-III EXECUTIVE STAFF G-IV PERMENANT G-V G-VI G-VII G-VIII G-IX G-IX SYMBOL NIL AM DM M DCM CM DGM GM SGM CFO DMD MD Super intendant Officer Assistant Manager Deputy Manager Manager Deputy Chief Manager Chief Manager Deputy General Manager General Manager Senior General Manager Certified Financial Officer Deputy Managing Director Managing Director RANK NIL Clerk peon

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PROCEDURE OF PAYROLLNEW APPOINTMENTS 1. Payroll section reserve a copy of letters from HR for new employees being hired 2. Master record for each employees is raised e.g. all information is input into database Oracle system along with basic pay, allowances and benefits for generation of monthly payroll slips AMENDEMENTS IN PAY STRUCTURE OR CONDITIONS HR will send a formal letter to employees & staff section of payroll, the payroll section will then change the definition and amend the master record according to letter given by HR ATTENDANCE RECORD 1. Employee sign in register on daily basis 2. No record of attendance is kept by Payroll section 3. Adjustments in salaries/wages, these advices record show leaves, leaves without pay & absences PAYMENT OF SALRIES WAGES 1. Pay goes in employees account directly from Head office HO Karachi 2. Cash/bank section of finance is responsible for disbursement of cheques payable for respective banks 3. IT department is responsible for running the payroll batch (result is printing of pay slips) 4. The pay slips are distributed to the employees the day after the bank advices re sent out 5. The copy of pay slip is provided to each employee as an evidence 6. In HO pay slip are handed over by payroll section, while to other it is couriered FINAL SETTLEMENT 1. In case of retirement, leaving the service all dues of the employee become payable immediately 2. All information relating to employee is submitted to HR 3. Payroll section arranges funds for subsequent disbursement

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EXECUTIVE STAFF (G1 GIX,DMD,MD)Separate Register is maintained for Executive staff allowances & benefits, following are the listed allowances and benefits that executive staff has

ALLOWANCE & BENEFITSCAR ENTITLEMENT GRADE VII VIII IX, MD CAR "CC" 1000 1300 1600 GRADE VII VIII IX MD LITRES/month 184 273 364 340

PETROL & MAINTENANCE 1. Petrol Allowance is paid in advance 2. if petrol price is changed its adjusted in next month 3. Car maintenance is also borne by the company

DRIVER WAGES 5000Rs (if not on company payroll), no allowance on shofar driven car CLUB SUBSCRIPTION Given to Grade VIII IX TELEPHONE BILLS One connection only for MDs MEDICAL EXPENSES 1. Spouse, children (after death or retirement) 2. Medical available for spouse only & 21 year less childrens 3. Maternity leaves 3 deliveries allowed on SSGC panel HOSPITALIZATION ENTITLEMENT GRADE MD & IXVIII VIII IV,V,VI I,II,III

AKUH Private-do-doSemi Private -do-

OMI-do-doSemi Private -do-

OTHER HOSPITALS VIP-do-doPrivate with AC Private without AC P a g e | 34 s

TRAVELLING EXPENCE HALTING ALLOWANCE RENT PAYMENT 45% of basic salary, if not taken it will be adjusted in salary FIELD ALLOWANCE Allowance given to executives for visiting fields outside their office LOANS & ADVANCES Authorized by HR departmentFestival Loans Muslims Muslims Non-Muslims Eid-ul-Fitar Eid-ul-Azha Christmas Amount/year 30,000 20,000 50,000

Loan are to be paid in 10equal installments, amount will be deducted from salary without interest LOANS AGAINST PROVIDENT FUND EOBI Employee old age benefit institution (subscription fees is 180rs/month) See APPENDIX C for EOBI form SPORTS CLUB Subscription fees is Rs. 1/month SSGOA SUI SOURTHER GAS OFFICER ASSOCIATION May opt to contribute 50/month against subscription of SSGC officer Association & 36Rs/month for insurance (see APPENDIX C) HAJ SCHEME Nine people (3 from each unit A,B,C) will be given money to perform HAJ, billeting is done, 156/month is subscription fees EXECUTIVE INSRUANCE State Life insurance, Jublee Insurance, based on lowest bid & higher credit rating ECCS EXECUITVE CREDIT CORPERATIVE SOCIETY Joint organization of PPL(Pak Petroleum Limited) & unit C of SSGC, 500Rs is contributed towards the society CONVEYANCE ALLOWANCE Grade 1 to VI 300/month included in salaryP a g e | 35 s

If female employee takes company transport facility she will not get allowance but 2000Rs will be deducted from salary HOUSED EXECUTIVE Free accommodation to the executives; free in their SSGC society e.g. employees living in KT terminal accommodation society RETIREMENT BENEFITS Deductible from Salary Provident Fund (PF) 7.5% of basic pay Benevolent fund (BF) *mandatory 1.10% of basic pay Non-Deductible from Salary Pension 20% if Annual Salary

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UNIONIZED STAFF (G1 G5)Unionized Staff Payroll Allowances are changed every 2year with respect to CHARTER OF DEMAND

CHARTER OF DEMANDCharter of Demand is a memorandum of settlement between SSGC & CBA * COLLECTIVE BARGAINING AGENT COD for year 2009-10 is made by PEOPLE LABOR UNION, who won the election and become representative of CBA Management and Staff Union sit together to negotiate & do consensus after every 2year to renew payroll, COD has all the allowances, benefits or any other modification in calculation rates of any allowance or any new policy mentioned is mentioned in this COD HOW CHARTER OF DEMAND WORKS 2year period2007-2008 2009-2010 01-Aug-10 12-Dec-10

CHARTER OF DEMANDCOD expires New COD Negotiation held New COD made on 1 august 2010 Effective from 1st Jan 2009 to 1st Dec 2010 COD expiresst

WORKINGbefore the COD for 2009-10 is made all allowance will be given according to old COD Adjustments will be done according to new COD for period in which expired COD was used

OBJECTIVES 1. To ensure a sound and materially beneficent industrial and economic relationship between the management and its workmen 2. To set forth herein a complete agreement between the parties covering all aspects of the terms and conditions of services of regular workmen directly employed by the company 3. To stabilize labor-management relations and to specify the rights and responsibilities of the company 4. To ensure continually improving efficiency, higher productivity, control of UFG and optimum use of company resources in order to promote and improve the industrial and economic relationship between the company and its workmen 5. To implement the directives of the competent government agencies e.g. Oil & gas Regulatory Authority etc.

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ALLOWANCE & BENEFITS (ACCORDING TO NEW COD 2009-2010)APPOINTMENT OF WORKERS CHILDREN 1. Children/ widows of deceased workers expired during service will be offered employment in the company * provided that no son/daughter/widow is already in the employment of the company 2. Board of directors has principally agreed to revive appointment of retired workers children *provided that no son/daughter/widow is already in the employment of the company

3. 50% Retired employees children shall be appointed on seniority of retirement basis effective 1998 when last induction was made DISABLED QUOTA HAJ Number of Unionized member performing Hajj is raised from 10 to 14 UMRAH 21 workers (7 from each unit) by draw will be sent to perform umrah every year *for employees whohave been in service for last 5years and have not perform umrah on company account

Company will pay Rs 35000/- in lumsum along with 15 days special leave with pay including travel time. MINORITY WORKERS 6 workers from minority communities (2 from each unit A,B,C) will be selected on service seniority basis to visit the holy places in Pakistan Amount of Rs 15000/ has been enchanced to Rs 35000 for visit of holy places BASIC PAY/ ALLOWANCES GRADEI II III IV V

EXISTING PAY SCALE(MIN BASICPAY INCREMENT/YEAR MAX BASICPAY)

REVISED PAY SCALE(MIN BASICPAY INCREMENT/YEAR MAX BASICPAY)

1695-120-3495 1855-130-4195 2075-150-4775 2325-175-5475 2775-200-3775-250-100025

2695-180-5395 2855-195-6365 3075-225-7125 3325-265-8095 3775-300-5275-375-14650

Flat increase of 26% of basic pay or minimum of Rs 1000/ will be granted to all unionized staff HOUSE ALLOWANCE The minimum house allowance for non-housed workers has been enhanced from Rs 1850/- to Rs 2500/- effective july 1st 2008 SPECIAL PAY 50% of special pay is merged into basic pay effective 1st January 2010P a g e | 38 s

OVERTIME & LEAVE ENCHASMENT FORMULA This formula is effective as of 1st January 2010, (for the period of 1st Jan 2009 to 31 Dec 2009 the old COD formula will be used) OVERTIME FORMULA = Basic + House Allowance + Local Compensatory Allowance X 3 13 X Weekly working hoursLEAVE ENCAHSMENT = No of days X Basic Pay + house Allowance + Local Compensatory Allowance +

Domestic Amenities + Industrial Area Allowance ALLOWANCES 1. ADHOC ALOWANCE @ Rs 1200/- per month will be paid to all regular workmen who are on the payroll of the company as on 1st july 2008 2. ELECTRICIY ALLOWANCE from Rs 450 increased to 750/month *effective 1st july 2010 3. COMPANY DEARNESS ALLOWANCE from Rs 380 increased to 780/month *effective 1st july 2010 4. CLINIC CONVEYANCE ALLOWANCE from Rs 100 increased to 300/month *effective 1st july 2010 5. CONVEYANCE ALLOWANCE from Rs 975 increased to 1275/month *effective 1st july 2010 6. GOOD ATTENDANCE ALLOWANCE if employee take less than or equal to 5 leaves in quarter he/she getsgood attendance allowance

SHIFT DUTY ALLOWANCESHIFT Morning COD 2007-2008 (OLD) 100 /day/attendance COD 2009-2010 (REVISED) 150 /day/attendance 300 /day/attendance

Evening/Night 200 /day/attendance

LEAVES THAT CAN BE TAKEN IN CASH 1. CEL CASH ENTITLEMENT LEAVE - Employees have 30 Leaves which he/she can take for whichthere would be no deduction in pay, employee can take cash against these 30 leaves

2. S&CL SICK & CASUAL LEAVE - Employees has 50 Sick and casual leaves for which there will be nodeduction in pay a part from 30 leaves of CEL

LEAVE FARE ASSISTANCE LFA is enhanced from Rs 5500 to 10,000/year * effective 1st Jan 2010 1. Once a year employee get this allowance of going outstation 2. Leave must be more than 5days 3. If you dont avail your FLA it is accumulated for 3years maximum 4. You can also cash the FLA 5. See APPENDIX C GAS ALLOWANCE Gas allowance is enhanced from Rs 400 to Rs 600/month effective 1st Jan 2009P a g e | 39 s

TRAVELLING & DEARNESS ALLOWANCESGRADE I,II,III IV & V GRADE I,II,III IV & V TA/HA/FA EXISTING 150 175 TATA/DA EXISTING 150 160 REVISED 240 260 REVISED 225 240

HIGHLY EDUCATED WORKERS CHILDRENS Childrens of highly educated workers will be given preference for employment in executive grade PROMOTION POLICIES 1. Workers who have no opening in Grade V at present and having eight years of continuous and satisfactory service in grade IV will be given move over to next grade i.e grade V with same designation effective 1st Jan 2010 2. Workers will be given preference for promotion to executive grade subject to availability of vacancy and meeting required criteria for said post (THIS PROMOTION WAS LAST GIVEN 8YEARS BACK) 3. Workers who remain in the same grade for a minimum period of 5 years will be promoted to the next higher grade subject to fitness/trade test RETIREMENT Rs 100/ head will be allowed for arranging simple tea party in honor of worker retiring FREE GAS FACILITY 1. Gas tariff is enhanced from 4MCF to 5 MCF/month & 48MCF to 60MCF/year credits will not be carried forward to next year 2. Workers in coldest stations (quetta, musung, kalat, ziarat, pishin, kuchhlok and mach etc) is enhanced to 110 MCF /year effective 1st July 2010 MEDICAL FACILITIES 1. Family medical allowance enhanced to Rs 2500/month 2. Dependent parents of the worker, not availing medical facility from any other source will be eligible for free medical facility subject to submission of affidavit by the worker and necessary verification from internal audit department 3. Workers songs age has been enhanced to 25years for medical purposes 4. Treatment of congenital disease will be allowed 5. AC room will be provided to IPD patients irrespective of grades at Karachi on recommendation of consultant physician except AKUHP a g e | 40 s

6. Private room irrespective of grade will be provided to patients referred to Karachi from interior Sindh and Baluchistan except AKUH 7. Food allowance for IPD patients is enhanced to Rs 200/day providing no food is supplied by hospital 8. Medical bills will be processed as early as possible after completion of all formalities 9. The certificate issued by MBBS doctor for grant of sick leave will be entertained for grant of due sick leave up to maximum of 30days in continuation of earned leave/out station casual leave 10. Company will consider opening od day care Centre for female workers babies where feasible 11. Special children of workers will be allowed to receive free medical facilities including accessories from the company till retirement of worker MATERNITY ALLOWANCE Maternity allowance enhanced from Rs 7500 to Rs 10,000 per delivery HOUSE BUILDING ALLOWANCE House building loan is enhanced from Rs 300,000 to 400,000 MOTORCYCLE MAINTENANCE ALLOWANCE Motorcycle maintenance allowance enhanced from Rs 600 to Rs 900/month WORKERS UNIFORM Workers uniform Kit new prices, if workers are found not in proper uniform he/she will be given warning, and later on matter will be dealt with as per disciplinary rules & laws S.NO1 2 3 4

CATEGORY1,2A,2B,3,3F,4,5,6 & 7 8 8F 9

RATE OF UNOFORM FOR THE YEAR 20104000 6000 8000 2500

RATE OF UNIFORM FOR YEAR 2011 & ONWARDS5000 6000 8000 2500

CANTEEN SUBSIDY Canteen subsidy of Rs 400/month will be paid to the workers posted at locations where canteen facility does not exist ESTABLISHMENT LOAN Establishment loan enhanced from Rs 20,000 to Rs 30,000 *subject to clearance of old loan SCHOLARSHIP Scholarship for the workers children is enhanced from Rs 500 to Rs 800/month METER READING INCENTIVEP a g e | 41 s

Meter reading incentive from Rs 2/meter is increased to Rs 3/meter *subject to meter readings above fixed meter readings/day FAIR PRICE SHOP Management agrees to open fair price shops at the regional offices SPECIAL FINANCIAL SUPPORT Funeral expenses is enhanced from Rs 15,000 to Rs 25,000Rs WINTER ALLOWANCE Winter allowance enhanced from Rs 600 to 1000/month OFFICE BEARER OF CBA (OUTSIDER) President of CBA (not worker of SSGCL) will be entitled for lump sum salary of Rs 50,000/month, free medcal facility for self and his dependant family members If President of CBA is worker of SSGCL he will be entitled for salary equal to Grade V FESTIVAL ALLOWANCE GRADEI II & III IV V

EUD UL FITAR ADVANCE15,000 20,000 25,000 30,000

EID UL AZHA ADVANCE10,000 15,000 20,000 20,000

TOTAL/ANUM25,000 35,000 45,000 50,000

GENERAL POINTS 1. Management has agreed to provide companys Hut, H-8 at hawks bay to workers on payment basis only on request forwarded through DGM(IR) 2. A canteen committee comprising representatives of IR, admin N CBA will be constituted to look after the affairs of canteen including canteen contract 3. A suitable prayers room for the female workers will be provided 4. Workers children will be given preference for selection in sports teams on talent basis 5. Management will arrange library subject to availability of suitable place 6. Company will provide one companys vehicle, only for one day in connection with marriage of worker, his sons/daughters and dependent real brothers and sister for use within the city

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DATA FLOW DIAGRAM OF PAYROLL

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WORK DONE UNDER SUPERVISION OF MR IMRANThere was a issue regarding OVERTIME raised by government auditors which goes back to late 198790 The government auditors had raised the overtime issue few years back and had raised it again, they want evidence of allocation of 68Million Rs as overtime, and to proof that it is allocated properly It was Mr. Imran job to prepare a memoredum on behalf of CFO send to Government auditors giving them resonable explanation that the allocation of overtime amount was fair and not abnormal I was given the tast to prepare that memoradum, for that purpose we had to see old records of 1990 -1993 as to get and average of overtime given in that period, and compare it with 1987-1990 As SSGC doesnt keep any record of 20years back, so SSGC had no records to show, so it was my task to make a memorendum giving them explanation Memorendum (answer to the government query is given in next page) The CASE STUDY is attached in APPENDIX C

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From: CFO Ref: AD/RM/1286 Date: June 25th 2010

To: GM(INTERNAL AUDIT)

DAC MEETING HELD ON 18th JUNE, 2010 PARA#54 (1992-93) REASONS FOR JUSTIFICATION OF OVERTIME PAYMENT This is with Reference to Audit para54)1992-93) related to "excessive overtime" incurred by SSGC in years 1987-90, auditor observation is un doubtful, we would like to add some extra information which is relevant to this case regarding opinion of auditor As recorded in previous books of accounts, the overtime in year 1989 was 19Million (the average of 4years 1987-1990 was 17million/year) which in comparison with next 4 years 1990-1993 is far less, information provided below in table Years 1989 1988 1987 1986 overtime 19 15 19 15 68 Million Years 1993 1992 1991 1990 overtime 95 51 46 33 225 Million

Assumed

In light of above data, the overtime in 1986-19989 is very less compared to next 4years According to auditor understanding the 225million can also be accounted as humanely impossible with regard to the only 3% increase in employees High amount of hours id due to the reason of SSGC policy of how it converts rate in term of hours as mentioned below Double pay or 1.5 of basic pay is recorded as 1.5 & 2 hours added to total hours worked E.g. Normal hours worked/week = 40 hours overtime on Saturday = 13hours => 13 x 2 hours = 26hours (on Saturdays, sun extra hour worked is given double pay so it is recorded in terms of no of hours worked As double wage is given on Saturday so 26hours worked in 24hour day is humanly impossible, so the recording in SSGC is done in terms of hours X normal pay We hope the information provided above will clear the issue CFO PAYROLL P a g e | 45 s

ISSUES CONCERNING PAYROLL DEPARTMENTCHANGE OF BACK ACCOUNT employees take loan from bank, bank thinking the load will be cutoff from the salary coming in account, because its salary account, so some employees take heavy loan from banks and then change their salary account from SSGC & take another loan from the new Salary account they opened in new bank. Management took a step of asking each employee wishing to shift salary account to other bank, to get clearance form from the bank in case of any outstanding loans they have with the bank CHARTER OF DEMAND COD for unionized staff is very long process, many times COD is finalized when its eligibility is about to expire in few months, arears are calculated, the negociations should be made in proper time, if it takes too much time, then it should start soon enough to end before the period of its activeness starts. DOCUMENTS ATTACHED IN APEENDIX C 1. MR NADEEM PAY SLIP 2. EOBI FORM 3. LFA LEAVE FARE ASSISTANCE FORM ALONG WITH ORACLE FINANCIAL INVOICE SIGNED 4. APPLICATION FOR ESTABLISHMENT LOAN FORM 5. CASE STUDY OF OVERTIME QUERY RAISED BY GOVERNMENT AUDITORS 6. SEE CD FOR VIDEO CONTENT ON HOW TO OVERTIME & LFA IS PUNCHED IN ORACLE FINANCIAL

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CAPITAL BUDGETING (SECTION)A memorandum is issued from CFO giving guideline for preparation of budget (see Appendix D for Capital budget memorandum) Two types of budget are prepared in SSGC 1. REVENUE BUDGET 2. CAPITAL BUDGET (CAPEX) REVENUE BUDGET - expenditure on repair and maintenance of fixed assets or restore its original assessed standard of performance is normal revenue expenditure and should not become part of capital budget CAPITAL BUDGET - Capital expenditure are those that result in CREATION and or BETTERMENT in the life or productivity of assets, the future economic benefit of such assets are expected to continue for more than one fiscal year The budget proposals of each department should initially be reviewed by departmental/ divisional heads and after having been finalized, these should be signed and submitted to the FINANCE department. The finance department will COMPILE/ ANALYZE the preliminary estimates and will discuss, if required with the concerned departmental/divisional heads, after COMPLETION, the same will be submitted to the management for onward recommendation to the BOD approval SGMS of different divisional heads will be called to Karachi HO and they will cut and remove items in budget which are not required only in their area, e.g. SGM(T) transmission will cut items of budget proposed by Transmission area AFTER THIS A FUNCTION CODE IS ALLOCATED TO BUDGET it is uploaded By GL in case if budget gets less, then an approval is taken from CFO by which either extra budget is approved or items in which some money is left even after purchasing all items mentioned in its budget, the left over amount is then transferred to area where budget is less Making proposed budget (CAPEX), department wise, and account wise, company wise. To maintain the capitalization, depreciation, retirement and disposal of all the fixed assets.

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Preparation of capitalization and WIP schedules of all the companies i.e. Karachi distribution, Hyderabad distribution, Balochistan distribution, Transmission and Head Office. Prepare quarterly, half yearly and yearly accounts and schedules of organization.

BUDGET PHASEBudget is a financial statement which is prepared before the starting of the financial year containing the plans and policies to be pursued during that period. The budget section of finance department prepares capital expenditure budget (CAPEX) annually for all the departments of SSGCL. When budget section starts to create the budget, all the departments are notified to make the proposed budget themselves for their departments according to the requirement of their department and send it to budget section. After receiving the proposed budgets from the departments, the budget section examines it & discusses all particulars with the related head of department & staff giving special consideration to the justification of fixed asset requirement & funds available in the company. The budget section can increase or decrease the proposed amount of budget keeping in view, the available amount in the budget for that department. After the proposed budget is prepared by the Budget Section, budget is then sent to GM & SGM for its approval/changes & finally to the M.D for approval. When the budgets for all the departments have been finalized and approved by MD, then the agenda is prepared by budget section, which is reviewed by finance committee. Board of directors grants approval to the agenda after which the budget is authorized to be followed. Each department is then informed through inter departmental note along with a copy of their budget.

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PREPERATION OF CAPITAL BUDGETBudget is prepared function wise, SGM wise, & category wise, along with different summaries as per required by different SGM(s) concerning their area of concern and authority COMPANY WISE / FUNCTION WISECODE i ii iii iv v UNIT C A B QUETTA METER MANUFACTURING PLANT FUNCTION TRANSMISSION DISTRIBUTION KARACHI DISTRIBUTION INTERIOR SINDH (EXCLUDING KARACHI) DISTRIBUTION BALUCHISTAN MANUFACTURING

the company has 5 functions according to which code are definied, because the budget is so big that codes are used instead of typing functions in itseparate budget is prepared for unit a, b, c, quetta and meterplant DIVISION WISECODE a b c d e f g h i j HIERARCHY CFO SGM (T) SGM (D) SGM (MS) SGM (ES) SGM (CS) GM (SS&M) COMPANY SECRETARY GM (IA) GM (LNG) Project

e.g. CODE "b" SGM(T) - T represents Transmission, Every SGM is responsible for cut down in budget of their respective area, employees in Transmission will fill the budget proposal forms and send to finance department in Head office Karachi Meeting will be held where DM & SGM of transmission will look into the details of budget in form of PowerPoint presentation, he will then decide what is required and what is not Same goes for other areas represented by their respective SGM

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Above is the list of SGM(s) responsible for cutting down proposed budget of their division

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CATEGORYCODE 1 2 3 4 5 6 7 8 9 10 ASSET LAND BUILDING / OTHER CIVIL WORKS PLANT & MACHINERY TELECOMMUNICATION TOOLS & EQUIPMENTS TRANSPORT COMPUTER & ALLIED EQUIPMENT OFFICE EQUIPMENTS FURNITURE SECURITY

These are the categories of which capital budget is prepared, everything in capital budget is prepared under these 10 heads, in 2011 there has been addition of 1 extra head which makes it total of 11 heads every head in above mentioned category except s.no 7 & s.no 9 are decentralized, Code# 7: Computer & Allied equipment is Centralized and is dealt by IT department which has a separate form for it, the overall budget of computer and allied equipment is proposed by IT department Code#9: FURNITURE: the overall budget of Furniture is proposed by ADMIN department which has a separate form, that is why these 2 areas are called centralized areas

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This is an example of Approved Budget for Unit C

This is an example of Approved budget SGM(T), from the main budget file different budgets are made for concerned departments & SGM(s)

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Example of Approved Budget for Vehicles

SUMMARY of Approved Vehicles Budget

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e.g. in transmission capital budget approved under land is 0.4 million, and overall transmission capital budget is 330 million , total budget approved under heading of land is 4.65 million

Refer to CD for Video Content for more details.

WHERE EVER CD ICON APPEARS (PLEASE REFER TO DVD FOR VIDEO CONTENT)

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WORKING OF CAPITAL BUDGET QURIES IN ORACLEOracle Financial is used to view how much budget is allocated for a particular item, how much of that budget is used(ACTUAL BUDGET), how much is in process (encumbrance), and how much is left (funds Available)

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DETAILS OF BUDGET

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RECOMMENDATIONSUFG should be controlled, and should be taken as 1 st priority for SSGC to resolve. Reward should be granted to employees or anyone pointing out the area of leakage or theft. Job description should match to employees field of work Motivation and encouragement is not seen, management should conduct seminars or lectures that can boost employees moral and self-esteem to work in a loyal way towards company Overtime work should be discouraged, in my opinion overtime policy should be abolished or the overtime incentive given per each extra hour worked should be reduced by 50%. Which will discourage employees to do work in evening or night and sitting idle in morning, instead they would in standard timings, which will result in fast processing of data in timely manner Corporate culture should be implemented, with strict following of rules and regulations In the Gas Purchases section, the current practice for recording of the gas purchases from foreign companies is to use the exchange rate as of the last working day of the month and for the payment purpose, the exchange rate used is the exchange rate at the day of payment. As such, huge exchange gain/loss is recorded. Considering the current situation of devaluation of rupee against the dollar, the exchange loss would increase in future, if some kind of hedging is not done. Therefore, it is suggested that to use hedging process in order to avoid heavy losses due to exchange rate changes Sections staff should be seated in one area, so that communication among them is facilitated. Currently, there are some sections in which the staff is dispersed around the floor, which hinders the free flow of communication There is no balance between the numbers of employees in each section. Where the number of employees should be more to share the work burden but there are fewer employees then the required need. And where there is no work burden there are more employees than the required need. The need for employees should be analyze properly to allocate employees on right place to completely avail their skills Corporate culture should be implemented in SSGC

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APPENDIX A

WORLD GAS PRODUCTIONRANK COUNTRY World Russia United States Arab League European Union Canada India Iran Norway Algeria Netherlands Saudi Arabia Indonesia China Turkmenistan Uzbekistan Malaysia Qatar Mexico United Arab Emirates Egypt Argentina Australia Trinidad and Tobago Nigeria Pakistan United Kingdom Kazakhstan Venezuela Thailand Oman Ukraine Germany Bangladesh Iraq Libya Bolivia Brunei Burma NATURAL GAS PRODUCTION (M3) 3,021,000,000,000 654,000,000,000 545,900,000,000 405,510,000,000 197,800,000,000 187,000,000,000 140,000,000,000 111,900,000,000 99,300,000,000 85,700,000,000 76,330,000,000 75,900,000,000 72,300,000,000 69,270,000,000 68,880,000,000 65,190,000,000 64,500,000,000 59,800,000,000 55,980,000,000 48,790,000,000 47,500,000,000 44,800,000,000 43,620,000,000 39,000,000,000 34,100,000,000 31,700,000,000 30,800,000,000 27,880,000,000 26,500,000,000 25,400,000,000 24,100,000,000 21,050,000,000 17,960,000,000 15,700,000,000 15,660,000,000 14,800,000,000 14,700,000,000 13,800,000,000 12,600,000,000 RANK 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 COUNTRY Kuwait Romania Bahrain Brazil Azerbaijan Italy Denmark Colombia Vietnam Syria Poland New Zealand Japan Peru South Africa Croatia Tunisia Hungary Israel Philippines Austria Chile Mozambique Equatorial Guinea Cte d'Ivoire Cuba France Turkey Angola Serbia South Korea Ireland Taiwan Jordan Ecuador Republic of the Congo Czech Republic Belarus Tanzania NATURAL GAS PRODUCTION (M3) 12,500,000,000 12,500,000,000 11,330,000,000 9,800,000,000 9,770,000,000 9,706,000,000 9,223,000,000 7,220,000,000 6,860,000,000 6,500,000,000 6,025,000,000 4,573,000,000 3,729,000,000 3,400,000,000 2,900,000,000 2,892,000,000 2,550,000,000 2,545,000,000 2,350,000,000 2,200,000,000 1,848,000,000 1,800,000,000 1,650,000,000 1,300,000,000 1,300,000,000 1,218,000,000 953,000,000 893,000,000 680,000,000 650,000,000 640,000,000 457,000,000 416,000,000 320,000,000 280,000,000 180,000,000 172,000,000 164,000,000 146,000,000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38

RANK 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 101 102 103 104 105

COUNTRY Papua New Guinea Slovakia Gabon Spain Morocco Moldova Senegal Albania Barbados Greece Afghanistan Cameroon Kyrgyzstan Tajikistan Georgia Slovenia Aruba Botswana Belgium Belize Benin Bhutan Guinea Guatemala Guam Greenland Grenada Gibraltar REST OF WORLD

NATURAL GAS PRODUCTION (M3) 140,000,000 128,000,000 100,000,000 88,000,000 60,000,000 50,000,000 50,000,000 30,000,000 29,170,000 24,000,000 20,000,000 20,000,000 18,000,000 16,000,000 10,000,000 4,000,000 0 0 0 0 0 0 0 0 0 0 0 0 0

SALE PRICE & MINIMUM GAS CHARGESReference: http://www.ogra.org.pk/cats_disp.php?cat=90 Download link: http://www.ogra.org.pk/images/data/downloads/1278047663.pdf

OGRA ORDINANCEReference: http://www.ogra.org.pk/cats_disp.php?cat=11 Download link: http://www.ogra.org.pk/images/data/downloads/1132553559.pdf

WELL HEAD PRICESReference: http://www.ogra.org.pk/cats_disp.php?cat=89 Download Link: http://www.ogra.org.pk/images/data/downloads/1271066453.pdf No 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 Field-wise Well Head Gas Prices Field Name Units Adhi Badin Compression Badin Non-Golarchi Non-Associated Bhangali Bhit Bhadra Chachar Chanda Dakhani Daru Dhodak Kandkot Khipro Mirpurkhas Block Loti Mehran Fateh Shah Meyal / Dhulian Miano Mela Nandpur Panjpir Pariwali Pindori Pirkoh Qadir Pur Sadkal Salsabil Rodho Sari Hundi Sawan Sui Turkwal UCH Zamzama SSGCL Zamzama SNGPL Zamzama Wapda/Guddu Zamzama - Phase - II (From 01.01.2010 to 05.06.2010) Zamzama - Phase - II (From 06.06.2010 to 30.06.2010) Rs.per MMBTU Rs.per MMBTU Rs.per MMBTU Rs.per MMBTU $ per MMBTU $ per MMBTU $ per MMBTU $ per MMBTU Rs.per MMBTU Rs.per MMBTU Rs.per MMBTU Rs.per MMBTU $ per MMBTU Rs.per MMBTU Rs.per MMBTU Rs.per MMBTU $ per MMBTU $ per MMBTU Rs.per MMBTU $ per MMBTU $ per MMBTU Rs.per MMBTU Rs per MMBTU Rs.per MMBTU Rs.per MMBTU Rs.per MMBTU $ per MMBTU Rs.per MMBTU $ per MMBTU $ per MMBTU $ per MMBTU $ per MMBTU $ per MMBTU $ per MMBTU $ per MMBTU Price Effective 01-01-10 124.03 188.08 535.62 174.56 3.7585 3.7585 2.4897 2.7225 124.26 109.24 248.27 143.87 2.5348 116.75 2.6304 108.68 3.4993 2.6525 314.47 3.7585 3.7585 116.75 227.68 498.94 2.8253 491.35 3.4993 143.87 3.7585 3.9223 3.4093 3.4118 3.4523 3.4036 3.4992

FFRONT-PAGE Companies seek huge increases in gas tariff By Khaleeq Kiani Saturday, 26 Jun, 2010 | 03:06 AM PST | ISLAMABAD: Two gas utilities have sought Rs20.36 and Rs63.10 per unit increase in their prescribed prices with effect from July 1, to meet their revenue loss arising out of the governments decision to increase excise duty on gas production by Rs5 per unit. Informed sources told Dawn that the Sui Southern Gas Company Limited (SSGCL) and Sui Northern Gas Pipelines Limited (SNGPL) had submitted their review petitions before the Oil and Gas Regulatory Authority. The ogra had not only rejected their petitions for tariff increase, but also reduced their prescribed prices by Rs4.53 per unit. Ogra sources said that the regulator had received the two review petitions. A petroleum ministry official said that Ogra was unlikely to accept the two review petitions, although it would be obligated to allow about Rs4.90 per unit increase on account of the rise in excise duty. The gas companies will probably be allowed to raise prices proportionate to the rise in excise duty, the official added. The two companies have pleaded that because of the governments decision to increase excise duty on wellhead prices, it would not be possible for them to pay for gas purchases from producers. In the federal budget 2010-11, the government has raised the excise duty on natural gas from Rs5.09 at present to Rs10 per MMBTU. The decision will bring in an additional revenue of Rs7 billion. The money will go to Sindh in keeping with an understanding reached during negotiations for NFC award. The government has already decided not to pass on an average Rs4.53 per unit reduction in natural gas tariff approved by Ogra to mop up Sindh governments gas-related revenue loss under the National Finance Commission Award. Ogra had decided on May 18 to reduce prices of natural gas by an average of 2.55 per cent, or Rs4.55 per unit, for all categories of consumers from July 1. A notification for maintaining gas rates is likely to be issued by next week. Sindh had agreed during the NFC talks to allow Balochistan to have higher returns on gas produced from that province for the last few decades to address longstanding grievances of the people of Balochistan The Ogras May 18 determination said the prices of gas for domestic, commercial, industrial, CNG stations, fertilizer, cement and power generation would come down both for SNGPL and SSGCL. The two gas utilities had sought an increase in tariff at the rate of Rs20.36 and Rs63.10 per million British thermal unit (MMBTU), respectively, but Ogra held that average tariff for both companies should be reduced by Rs4.53 per cent.

Reference: http://www.dawn.com/wps/wcm/connect/dawn-content-library/dawn/the-newspaper/frontpage/companies-seek-huge-increases-in-gas-tariff-660

UNACCOUNTED FOR GAS

Saturday, March 13, 2010

KARACHI: The Oil & Gas Regulatory Authority (OGRA) is likely to give some relaxation on Unaccounted for Gas (UFG) targets set for Sui Southern Gas Company (SSGC) and Sui Northern Gas Pipeline (SNGP). OGRA officials told that plan was under way to raise UFG limit from 5.5 per cent to 6.5-7.0 per cent. This bodes well for the local gas utilities as higher the UFG targets, lower will be the profit erosion for local gas utilities, said Farhan Mahmood at Topline Securities. If that happens then SSGC and SNGP would be the beneficiaries, he believes, as their earnings will improve. World Bank will extent $250 million loan to gas companies to reduce UFG losses. However, no details have been released by these gas companies till now, he added. In order to check the efficiency of these gas utilities and to limit their line losses, government sets UFG targets for local gas companies. UFG is the term used for units, which are not billed (due to theft) or lost during the transmission of gas to the consumers. It is the difference of gas purchases and sales after adjusting internal consumption. For this, OGRA has allocated upper and lower limits. This means that if actual UFG losses will be higher than the upper limit, the entity would bear the full loss from its own profits. On the other hand, it can retain the savings in the event of performance being better than the lower target while absorb the 50 per cent of the loss on account of UFG between the lower and upper target, he explained. Historically, actual UFG losses are far above the upper targets due to system leakages and theft. Moreover, the value of UFG losses also depends upon cost of gas, as higher the cost of gas higher will be the value of loss units. That means whenever gas prices increases, probability of UFG losses to rise increases. According to fiscal year 2009 detailed accounts, both SSGC and SNGP posted combined UFG losses of Rs7.4 billion. SSGCs actual UFG losses stood at 7.9 per cent (target of 5.15 per cent) to Rs2.8 billion whereas SNGPs actual UFG losses were higher at 8.1 per cent (target of 5.15 per cent) to Rs4.6 billion. Their profits, on the other hand stood at Rs257 million (Earning per Share of Rs0.4) and Rs930 million (Earning per Shares of Rs1.7), respectively, Mehmood analysed. If there is an improvement in upper limit, SSGC would be the major beneficiary. According to our estimates, if upper limit of 5.5 per cent (set for fiscal year 10) is improved by 100-200bps, SSGCs earnings will improve by Rs1-2 per share (263-526 per cent), provided other things remain the same. Similarly, SNGPs Earning per Share will improve by Rs2-4 (118-235 per cent of fiscal year 09 earnings). The brokerage house analysis was based on Rs239 per mmbtu cost of gas versus average Rs242 per mmbtu cost last year, he added.

Reference: http://www.thenews.com.pk/print1.asp?id=228625

SSGC TO SPEND RS24BN TO CHECK GAS LOSSES (FIVE-YEAR PLAN)Last Updated on Saturday, 10 July 2010 16:41 Written by Administrator Saturday, 10 July 2010 11:08 KARACHI: The Sui Southern Gas Company (SSGC) plans to spend Rs24 billion over the next five years to replace corroded pipelines, which leak large quantity of gas, a top company official said on Friday. We lose Rs10 billion every year owing to leakages, said Dr Faizullah Abbasi, SSGC Managing Director, while talking to a group of journalists. The regulator imposes penalty on us for this gas leak and we lose another Rs3 billion. SSGC, one of the two natural gas distribution companies of the country, operates under strict monitoring of Oil and Gas Regulatory Authority. The utilities have to pay billions of rupees if gas loss, known as unaccounted for gas (UFG), exceeds five percent of total sales volume. SSGC has sales of around 1,100 MMCFD of gas annually. In nine months to March 2010, the UFG loss increased to 8.63 percent and the company reported loss of Rs306 million. UFG might go up to 12 percent by 2015 if we continued with the current setup, said Abbasi, who was appointed a few months ago. We aim to bring it down to 6.5 percent over the next five years. The World Bank has promised $250 million for improving natural gas supply infrastructure in the country. A part of these funds will go to SSGC, which is arranging most of the funds for the five-year plan from its own resources. Abbasi said that UFG losses stood at 100 million cubic feet per day (MMCFD), enough to run a 500MW power plant. Fifty percent of this loss is because of pipeline leakages and measurement errors while the rest is due to theft. The company has fast expanded its outreach in Sindh and Balochistan in the last ten years. From 1.5 million in 2000, the number of customers has jumped to over 2.2 million in 2010. The length of pipelines has increased to 34,000 km from 21,000km 10 years back. The growing thefts will not deter the company from adding customers, said Abbasi. We have been adding more retail customers recently and that has contributed to the UFG, he said, but, being a service provider, we cannot deny anyone the right to have piped connection. He said that the management has empowered officials at the grass root level to monitor customers and detect gas leakages and theft. This approach has never been tried. Now there will be accountability of everyone from top to the bottom. SSGCs revenue, which is the purchase price of gas, is decided by OGRA. The price of gas is fixed to reflect all costs plus 17 percent return on company's fixed assets. That should have been enough for sustainable profitability. But because of the UFG loss, it often lands in the red. For years, the management has pleaded OGRA to separate its other incomes from gas tariff. SSGC's profit from meter manufacturing, late payment surcharge and royalty from an LPG maker are included in the tariff. Abbasi said that this was like a protection for consumers.

Reference: http://finance.kalpoint.com/highlights/business-news/ssgc-to-spend-rs24bn-to-check-gas-lossesfive-year-plan.html

Daily Times - Site Edition

Friday, July 16, 2010 By Masroor Afzal Pasha

REDUCING UFG LOSSES - WB TO GIVE $125M TO SSGCKARACHI: The World Bank (WB) is in final negotiations with the Sui Southern Gas Company (SSGC) for providing a soft loan facility of $125 million to arrest and reduce the uncontrolled Unaccounted For Gas (UFG) in the companys network, which is causing a loss of roughly Rs 8 billion to Rs 9 billion annually. Earlier, the bank offered a soft loan facility of $125 million (R