Pakistan's gas sector is poised for a major overhaul as the government revives plans to break up the country's two state-owned gas utilities into five separate entities. The proposal, discussed at a high-level meeting between Petroleum Minister Ali Pervaiz Malik and World Bank Country Director Bolormaa Amgaabazar, aims to mirror the successful unbundling of the power sector into more than 15 ex-Wapda companies. This restructuring could reshape how natural gas is transported and distributed across the country, but it faces significant opposition from the utilities themselves and unresolved financial hurdles. Main Developments The reform framework proposes separating the transmission, distribution, and energy businesses of Sui Northern Gas Pipelines Ltd (SNGPL) and Sui Southern Gas Company Ltd (SSGCL). A new National Gas Transmission Company (NGTC) would be created to own and operate the transmission networks of both utilities, acting as a common carrier for all gas distribution companies, similar to the National Grid Company in the power sector. Under the plan, NGTC would not buy or sell gas itself but would charge wheeling fees to all suppliers and purchasers of locally produced gas or LNG. This would allow third-party access to the transmission network, opening the door for private sector participation throughout the gas value chain. The distribution networks would be divided into four provincial distribution companies, based on criteria such as population, network density, gas demand, and operational efficiency. Read also: 3 Key Takeaways from Pakistan's Rs13bn PTV Bailout and M-12 Boost The Petroleum Division wants to fast-track the process, seeking the prime minister's approval by the end of August 2026. A transaction adviser would be appointed to work out the unbundling details, with costs either financed by the World Bank or shared equally by the two gas utilities and recovered through end-consumer tariffs. However, both SNGPL and SSGCL, along with their shareholders, oppose the unbundling, viewing it as their dissolution and refusing to finance the process. Background This is not the first attempt at gas sector unbundling. Independent consultant KPMG and the Oil and Gas Regulatory Authority (Ogra) previously opposed a similar model, citing financial and technical viability concerns. They recommended broader consultations with provinces and private shareholders, leading to the plan being shelved in 2020. The current proposal appears to have learned from past criticisms by incorporating a phased implementation approach and emphasizing stakeholder consultations. However, experts have warned that the proposed gas distribution companies could become financially unsustainable and loss-making, given the existing challenges of transfer pricing, cross-subsidies, and uniform national gas prices despite varying system losses across provinces. Why It Matters The unbundling could bring much-needed private investment and efficiency to Pakistan's gas sector, which has long struggled with circular debt and operational inefficiencies. By creating separate transmission and distribution entities, the government aims to introduce competition and attract private capital, potentially improving service delivery and reducing losses. However, the plan carries significant risks. The distribution sector faces serious challenges, including system losses that are highest in Balochistan, followed by Khyber Pakhtunkhwa, Sindh, and Punjab. Without a clear pricing mechanism, such as a weighted average sale price equalisation, the new companies could struggle to remain viable, potentially leading to higher tariffs for consumers or further financial strain on the sector. There is also concern that influential business groups with connections in policymaking circles may seek to acquire stakes in NGTC, raising questions about transparency and the public interest. The opposition from the utilities themselves could delay or derail the process, making the outcome uncertain. What's Next The Petroleum Division aims to secure the prime minister's approval for the finalized roadmap by the end of August 2026. Following that, phased implementation would begin in consultation with all stakeholders, including provincial governments and the Council of Common Interests (CCI). Before appointing a transaction adviser, the terms of reference must be agreed upon, which depends on the mechanism for pricing and other key decisions. There is also a view within the Petroleum Division that broader consultations are needed before any consultant is hired, suggesting that the timeline may slip. The coming months will be critical in determining whether this ambitious reform can overcome its many hurdles.