Every year, billions of cubic feet of natural gas simply vanish into thin air, or rather, into leaky pipelines, faulty meters, and the pockets of thieves. Officially termed Unaccounted-for-Gas (UFG), this phenomenon represents one of the most persistent, and expensive, structural failures in Pakistan’s energy sector. And despite a clear statutory cap of 5%, the actual losses at the two state-owned utilities have historically danced between 6% and an eye-watering 17%.
The numbers are staggering. Based on recent financial disclosures, annual UFG-related losses are now crossing the Rs 60 billion mark i.e., a massive financial haemorrhage for a cash-strapped nation. When you factor in the cascading impact on the energy sector’s circular debt, which currently stands at an intimidating Rs 3.2 trillion, it becomes painfully clear why the International Monetary Fund (IMF) has made gas sector reform a non-negotiable condition for its bailout packages. So, where exactly does the gas go, and why can’t the authorities fix it?
Here’s the kicker: Sui Northern Gas Pipelines Limited (SNGPL) has shown that beating the 5% legal cap is possible. By deploying Laser Leak Detectors and installing thousands of Town Border Stations (TBS) to monitor gas flow in real-time, SNGPL managed to slash its UFG to 4.93% in FY24 (lowest in 18 years). It slipped slightly to 5.27% in FY25, but the company has proven the technology works.
Based on recent financial disclosures, annual UFG-related losses are now crossing the Rs 60 billion mark.
Sui Southern Gas Company (SSGC), on the other hand, tells a bleaker story. While they’ve managed to reduce losses from a catastrophic 17% down to roughly 10% in recent years through aggressive anti-theft operations, they remain stubbornly above the legal limit. In Balochistan, where the geography is punishing and the network sparse, the situation is particularly dire. Despite the progress, SSGC is currently contesting OGRA’s allowance of 12.07% for FY25, lobbying instead for a 10% cap – a figure that is still, notably, double the legal ceiling.
What’s perhaps more alarming than the actual losses is how the utilities are gaming the future. When you dig into their ten-year demand projections (provided to the regulator), a troubling pattern emerges. SNGPL, despite proving it can manage 4.93% UFG, is projecting allowances of 5.6% to 7.2% over the next decade. SSGC, meanwhile, isn't even trying to hide the pessimism, projecting a consistent UFG allowance of 12% to nearly 15% throughout the 2030s.
In simple terms, this means the utilities are effectively asking the regulator to allow them to lose up to 15% of the gas they buy before they even meter it to consumers. Their message seems to be clear, “We will continue to be inefficient, and the consumer must pay for it.” By inflating these projected allowances, they are securing tariff hikes for losses they shouldn't be incurring in the first place, essentially rewarding inefficiency with higher revenues.
So, what drives this UFG? It’s a mix of physical decay and criminal enterprise. Over 887 kilometers of pipeline have been repaired recently, but hundreds of kilometers of old cast-iron pipes are still awaiting replacement. And then there’s the theft. Between 2022 and 2025, SSGC’s Counter Gas Theft Operations department conducted thousands of raids, registered 731 FIRs, and recovered Rs 6.1 billion from illegal connections. Yet, the practice remains rampant. The Gas (Theft Control and Recovery) Act, 2016, exists, but enforcement is patchy outside of Karachi and Quetta.
The IMF is watching closely. The government has committed to shifting away from the old "cost-plus" formula and moving toward a performance-based margin for the utilities. The problem is that the utilities are pushing back, insisting that UFG targets cannot be separated from their current return structure. The verdict is inescapable: Pakistan cannot afford to subsidize inefficiency any longer. The 5% legal ceiling is law, not a suggestion. OGRA must find the regulatory backbone to disallow every single percentage point above that 5% mark from tariff recoveries.
If SNGPL can hit 4.93%, then SSGC can certainly do better than 10%. The technology is available; the legal framework exists. If implemented, this framework would immediately cap SNGPL’s allowed losses at 4-4.5% and SSGC’s at 5.5-6%. That would save the national exchequer billions annually, leaving more gas for industry and power generation, and keeping the circular debt from increasing further.