1.

0 Introduction of Organization

1.1 Nature of Organization

Sui Northern Gas Pipelines Limited is the largest integrated gas company serving more
than 2.7 million consumers in north central Pakistan through an extensive network in
Punjab and North West frontier province. The company has over 43 years of experience
in operation and maintenance of high pressure gas transmission and distribution system.
It also has expanded its activities to undertake the planning, designing and construction of
pipelines, for both itself and other organization.
Sui Northern Gas Pipelines Limited in a region of the nation that has a rapidly growing
demand for natural gas and power generation due to significant industrial development.

1.2 Natural Gas

Natural gas, as the name implies, is found in gaseous form naturally, underground at
varying depths and geographical formations. It is one of the most abundant energy
sources in Pakistan, and because it is produced domestically, it is not subject to foreign
disruptions of price or supply. Comprised primarily of methane, natural gas is odorless
and colorless when it comes out of the ground. After impurities are removed, the natural
gas is introduced into the pipeline system where it is transported to the consumers.

Prior to distribution, a harmless odorant is added to the gas so any leakage can be easily
detected before an unsafe situation occurs. In addition to this "rotten egg" odor, natural
gas has some built-in safety features. It is lighter than air, so it will rise and dissipate into
the atmosphere in the event of a leak. And it has a very narrow combustion range,
igniting only when mixed with air at a ratio of between 4 and 14 percent. Any mixture
higher or lower than that range and natural gas simply won't burn. It also requires a very
high degree of heat, at least 1200 degrees Fahrenheit, before it will ignite.

Once combustion occurs, natural gas is one of the cleanest-burning fuels available today.
When it is burned properly, the only emissions are carbon dioxide (which is what we
exhale when we breathe) and water vapor. Because of its clean-burning properties,
natural gas has become the environmental fuel of choice for many residential,

1
commercial and industrial applications. Such applications include: space heating, water
heating, cooking, and as a fuel for fireplaces, vehicles, power plants, commercial and
industrial boilers, as well as commercial and industrial processing.
1.3 Establishment of OGRA
The federal government promulgated the natural gas regulatory authority ordinance in
January 2000 based on the bill already passed by the national assembly in1999. Under the
ordinance, natural gas regulatory authority ordinance was established to regulator the
transmission, distribution and sale of natural gas, including determination of gas tariffs of
the companies with the prime objective of safeguarding the consumer's interest. later,
federal government decided to enlarge the scope of natural gas authority and
consequently the oil & gas regulatory authority ordinance was promulgated in march,
2002 which included the technical regulations of refineries, oil storages, oil pipelines, oil
marketing companies, compressed natural gas and liquefied petroleum gas and natural
gas regulatory authority ordinance was subsumed in oil & gas regulatory authority.
consequent upon oil & gas regulatory authority was establishment on 28th march, 2002
and with effect from march 15, 2003 federal government assigned to oil and gas
regulation authority for the regulation of liquefied petroleum gas and compressed natural
gas sectors in the country and has designated the oil & gas regulatory authority as an
authority in place of the director general (gas) of the ministry of petroleum and natural
resources. ten main gas companies are working in Pakistan under the oil & gas regulatory
authority,
1. Sui Northern Gas Pipelines Limited.
2. Sui Southern Gas Company Limited.
3. Oil and Gas Development Company Limited (Such Gas Field).
4. Oil and Gas Development Company Limited (Bhal Syedan Field).
5. Oil and Gas Development Company Limited (Nandpur & Panjpir Fields).
6. Central Power Generation Company Limited.
7. Engro Chemical Pakistan Limited.
8. Fuji Fertilizer Company Limited.
9. Pakistan Petroleum Limited.
10. Meri Gas Company Limited

2
1.4 Overview of organization
I am discussing about the sui Northern Gas Pipelines Limited, which is working in
province Punjab and north west province. Sui Northern Gas Pipelines Limited was
incorporated as a private company in June 1963 with the object of transmission and
distribution of natural gas in Punjab, North West frontier province, and the federal capital
area. Sui Northern Gas Pipelines Limited was later converted into a public limited
company in January 1964 under the companies act 1913 (now companies ordinance
1984), and is listed on three stock exchange of the company. The company took over the
existing Sui-Multan system (349 Kms of 16 inch and 129 Kms of 10 inch diameter
pipeline) from Pakistan industrial development corporation and Dhulian-Rawalpindi-
Wah system (132 Kms of 6 inch diameter pipeline) from Attock Oil Company limited.
the company's commercial operations commenced by selling an average 47 MMCFD gas
in two regions viz. Multan and Rawalpindi, serving a total number of 67 consumers. Sui
Northern Gas Pipelines Limited is the largest integrated gas company with an existing
transmission system of 6,195 Kms and distribution system of 46871 Kms. The company
serves more than 2.7 million consumers in north central Pakistan through an extensive
network in Punjab and North West frontier province. The company has over 43 years of
experience and maintenance of high pressure gas transmission and distribution system. it
has also expanded its activities to undertake the planning, designing and construction of
pipelines, both for itself and other organizations.
1.5 Company Profile

Sui Northern Gas Pipelines Limited (SNGPL) is the largest integrated gas company
serving more than 3.4 million consumers in North Central Pakistan through an extensive
network in Punjab and NWFP. The Company has over 46 years of experience in
operation and maintenance of high-pressure gas transmission and distribution systems. It
has also expanded its activities to undertake the planning, designing and construction of
pipelines, both for itself and other organizations. SNGPL operates in a region of the
nation that has a rapidly growing demand for natural gas and power generation due to
significant industrial development.
SNGPL was incorporated as a private limited Company in 1963 and converted into a
public limited company in January 1964 under the Companies Act 1913, now Companies

3
Ordinance 1984, and is listed on all the three Stock Exchanges of the Country.
SNGPL transmission system extends from Sui in Baluchistan to Peshawar in North West
Frontier Province (NWFP) comprising over 7,347 KM of Transmission System (Main
lines & Loop lines). The distribution activities covering 1,624 main towns along with
adjoining villages in Punjab & NWFP are organized through 8 regional offices.
Distribution system consists of 67,449 KM of pipeline.
SNGPL has 3,451,142 consumers comprising Commercial, Domestic, General Industry,
Fertilizer, and Power & Cement Sectors. Annual gas sales to these consumers were
584,895 MMCF worth Rs. 168,933 million during Jul 08 - Jun 09.
1.6 Company Overview

• Regional Establishment
• Administrative Structure
• Organizational Structure

1.6.1 Regional Establishment

Sui Northern Gas Pipelines Limited was incorporated as a private company in June 1963
with the object of transmission and distribution of natural gas in Punjab, North West
frontier province, and the federal capital area. Sui Northern As Pipelines Limited was
later converted into a public limited company in January 1964 under the companies act
1913 (now companies ordinance 1984), and is listed on the three stock exchanges of the
company.
In Sui Northern Gas Pipelines Limited, three main departments are working.
1. Transmission.
2. Distribution.
3. Project.

1.6.1.1 Transmission

basically on operational out lift, the company handles the entire operation of a lengthy
network of high pressure gas lines comprising 6195 km in length, varying from 6 inch to
36 inch of diameter in accordance with the mineral gas safety rules, oil and gas regulatory
authority regulations and international gas transmission industry's standards.

4
1.6.1.2 Distribution

The company's business strategy is to maximize sales of gas by entering in to new areas
through development/expansion of its infrastructure. in accordance with the policy of
government of Pakistan. The company has focused on country's economic revival by out
reaching industries for gas supply. During the last fiscal year, the company has provided
a record number of 531 industrial gas connections resulting in displacement of imported
liquid fuels to save precious foreign exchange.
The share of natural gas in Pakistan’s energy supply mix has increased from 41 % to 51“,
whereas that of oil has decreased from 43 % to 29 % during the last three years. The
company has its gas distribution network in 831 difference towns and villages of Punjab
and North West frontier province. As on June 30, 2006, the total length of distribution
network of Sui Northern Gas Pipelines Limited stands at 46964 km.
1.6.1.3 Project
Sui Northern Gas Pipelines Limited, as contractor, carried out construction of pipelines
8” dia, 20 km Badar gas field to Qadir pur field. Similarly an engineering, procurement
and construction. Contract was successfully executed from M/s. MOL Pakistan in the
shape of 10” dia, 8.75 km Makori-Kharrapa, and gas pipelines. During the year, the
company successfully completed various mega projects like gas supply to Murree, Kot
Radha Kishan, Lilla town (through CNG) and many other projects in difference regions
of Punjab and the North West frontier province.
The company has planned to undertake the project of gas supply t various southern
districts of north west frontier province (with estimated cost of rs.2.1 billion) viz Hangu,
Karak, Lakhi, Bannu, Dera Ismail Khan, Tank and southern district of Punjab (with
estimated cost rs.3.7 billion) viz Hasilpur, Chishtian, Mandi, Bahawalnagar, Burewala,
Pak Pattan, Haroonabad, Duniapur, Karor Pakka, Vehari, Tibu Sultan, Khairpur
tammawali, Yazman, Minchinabad and Fort Abbas through construction of transmission
lines of 315 km and 115 km, respectively and distribution supply mains of 460 km.

5
6
1.7 Administrative Structure

Policy guidelines and overall control is vested in the elected Board of Directors as
provided for in the Companies Ordinance 1984

1.8 Organizational structure

Head office of the company is situated in Lahore, chairman, managing director, other
departmental senior general managers and all directors offices are there. They control all
the areas offices from there. All the financial and non financial matters i.e. credit from
bank casting budgeting, allocation of funds matter, taxes, training to employees etc, are
made under the supervision of the chief financial officer. Company has the separate
internal audit department. The audit department checks that the work is being done
according to the company policies, departmental procedures. The audit department
periodically conducts the audit of different departments but on the other hand the audit
department transfers the pre-audit function to the accounts department of limited
payments. Chief financial officer is being appointed according to the clause (xv) of “code
of corporate governance” by Securities and Exchange Commission of Pakistan. Audit
committee is being established according to the clause (xxx) of “code of corporate
governance” by securities exchange commission of Pakistan. These committees are
established for the purpose of improving transparency and discourse in financial
reporting of companies and for improving their governance to protect the interests of
investors.
Board of directors is elected by the share holder of the company. The managing director
and the chief executive officer of the company is working under umbrella of board of
directors. The board of directors who made the decision for the entire satisfaction of the
investors as well as the consumer. Other the senior general managers are working under
the deputy managing director who directly reports to the managing director and chief
executive officer.

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8
1.9 Regulations
Regulatory Regime comprises of:

Code of Corporate Governance.

Oil & Gas Regulatory Authority Ordinance (XVII of 2002) dated 28th March 2002

Natural Gas Regulatory Authority (Licensing) Rules 2002 dated 26th February 2002.

Natural Gas Tariff Rules 2002 (Draft – 5 July 2002).

Such other Rules and Regulatireons which the Oil & Gas Regulatory Authority
(OGRA) may prescribe. Under the existing pricing and regulatory regimes, following
operating conditions have been laid down:

Allocation of gas from different sources is made by GOP while the wellhead prices
are fixed by the OGRA per Petroleum Concession Agreements/contracts.

Consumer selling price including sales to major consumers (i.e. power, fertilizers etc)
are notified by the GOP/OGRA.

SNGPL is guaranteed a rate of return @ 17.5% on its net fixed assets in operation
(ROA) for meeting financial charges, taxation and a reasonable return to the
shareholders.

The prescribed price i.e. the price which the company is allowed to retain out of
consumers selling price to meet the covenanted rate of return, is determined by OGRA.
1.10 Statements
• Core Values
• Objectives
• Vision & Mission Statements

1.10.1Core Value

COMMITMENT
We are committed to our vision, mission, and to creating and delivering
stakeholder value.

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 COURTESY
We are courteous - with our customers, stakeholders and towards each
other and encourage open communication.
COMPETENCE
We are competent and strive to continuously develop and improve our
skills and business practices.
RESPONSIBILITY
We are responsible as individuals and as teams - for our work and our
actions. We welcome scrutiny, and we hold ourselves accountable.
INTEGRITY
We have integrity - as individuals and as teams - our decisions are
characterized by honesty and fairness.

1.10.2 Key Objectives

Sui northern gas pipelines limited committed for;
1. Enhancement of System Capacity
2. Expansion of Transmission and Distribution Network.
3. Increase in Gas Sales.
4. Rehabilitation of Transmission and Distribution Network.
5. Reduction in Unaccounted for Gas Losses.
6. Improvement in Profitability.
7. Improvements in Consumer Services.
8. Adoption of Information Technology.
9. Human Resource Development.
10. Pursue Pipelines construction and Advisory Business
1.10.3 Vision Statement
To be the leading integrated natural gas provider in the region seeking to improve the
quality of life of our customers and achieve maximum benefit for our stakeholders by
providing an uninterrupted and environment friendly energy resource.
1.10.4 Mission Statement
A commitment to deliver natural gas to all door steps in our chosen areas through

10
continuous expansion of our network, by optimally employing technological, human and
organizational resources, best practices and high ethical standards.
1.11 Board of Directors

Mian Misbah-ur-Rehman
Chairman
Mr. A. Rashid Lone Chief Executive/Managing Director
Mr. Dr. Faizullah Abbasi
Director
Mr. Mansoor Muzaffar Ali
Director
Mr. S. M. Asghar
Director
Mr. Muhammad Iqbal Awan
Director
Mr. A. Samad Dawood
Director
Mr. Abdul Bari Khan
Director
Mr. Tariq Iqbal Khan
Director
Mian Raza Mansha
Director
Mr.Inam ur Rahman
Director
Malik Tahir Sarfraz
Director
Joint Secretary (Admin), Ministry of Petroleum & Natural Resources
Mr. Syed Zahir Ali Shah
Director

1.12 Message From Managing Director

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 Welcome to the official website of Sui Northern Gas Pipelines Limited (SNGPL), we
invite you to get to know our Company by exploring this site on which you will learn
about our mission, vision, objectives, core values and a host of other information.
Since its inception in 1963, SNGPL has grown manifold as a result of sustained
efforts, progressive outlook and dynamic approach in its operations. Our human
resource capital is always there to serve you with passion and dedication. As we look
ahead, we believe that SNGPL is ideally positioned for continued growth.
The wealth of our Company is our customers. We view them as our stakeholders. I
would welcome email messages from all stakeholders giving suggestions on ways to
provide you with a better service. Should your suggestion be of particular interest to
us, I would be pleased to have an opportunity to meet with you and explore them in
more detail.

1.13 Profile of Employees

As on monthly report of August, 2009 there are 6994 employees are working in which
6652 employees are working as an operation, and 342 employees are working as a
project.

Years Operation Project Total

2005 6904 264 7168
2006 6852 249 7101
2007 6712 209 6921
2008 6916 224 7140
2009 6652 342 6994

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 Profile of Employees

60000
No.of Employees

50000
40000
Operation
30000
Prpject
20000
10000
0
05

06

07

08

09
20

20

20

20

20

Years

The other department wise details are as under: (under the August, 2009)

Department Executive Subordinate Total

MANAGEMENT 5 7 12
DMD 3 5 8
SGM (HR) 2 2 4
CFO 1 0 1
SGM (ES)2 2 2 4
ACCOUNTS 67 317 384
LOGISTIC SUPPORT 49 544 593
AUDIT 32 39 71
BILLING 67 866 933
CIVIL CONST 3 74 77
COMPRESSION 40 249 289
CORP. AFTER 6 12 18
DISTRIBUTION 123 2109 2232
FINANCE 13 20 33
IT/MS 37 82 119

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H.S & ENV 4 2 6
TRAINING & DEVELOPMENT 5 0 5
LEGAL 4 10 14
METERING 11 221 232
PLANNING & DEVELOPMENT 9 5 14
HUMAN RESOURCE OPS 11 32 43
PROJECTS 42 127 169
PURCHASE & STORE 41 245 286
QUALITY & CONTROL 9 109 118
SALES 45 292 337
TELECOM 17 51 68
TRANSMISSION 79 593 672
UFG CONTROL 8 7 15
CORROSION 28 209 237
TOTAL 763 6231 6994

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 Chapter 2
Business Operation

15
2.0 Business Operation
2.1 Product Line
Although the company sales only natural gas. The main source through the Sui Northern
Gas Pipelines Limited is obtaining gas PPL (Pakistan Petroleum Limited). However, if
we think there are two types of gas.
1. Liquid Petroleum Gas (LPG)
2. Compressed Natural Gas (CNG)

There details are as under;

2.1.1 Liquid Petroleum Gas (LPG)

Liquid petroleum gas it is used for filling cylinders and it is liquid from gas. Before
filling the cylinders, the gas temperature is reduced and then fills the cylinders, which
used for domestic purpose, welding purpose etc
.
2.1.2 Compressed Natural Gas (CNG)
Now a day every one knows about this type of gas. It is using in vehicles; it is filled
through compressed function and fill in specific pressure.

2.2 Main offices of Sui Northern Gas Pipelines Limited

Head office Lahore

Gas house
21 Kashmir road,
P.O.boxno.56,
Lahore- 54000, Pakistan.
Ph: (+92-42) 99080000 & 99082000
Facsimile: (+92-42) 99201369 & 99201302
Website: www.sngpl.com.pk

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Faisalabad
Sargodha road.
Ph: 041-9210033-35
Fax: 041-9210037
Islamabad
28-30 sector 1-9, industrial area.
Ph: 051-9257710-19
Fax: 055-9257770
Lahore
21- industrial area
Gurumangat road, gulberg III
Ph: 042-99263361-80
Fax: 042-99263400
Multan
Piran ghaib road.
Ph: 061-9220081-86
Fax: 061-9220090

17
2.3 Core Business
2.3.1 Gas Sources

18
 DESCRIPTION Total (MMCF) Avg/Day (MMCF)
BALOCHISTAN
Sui(SML) 139,795 383
Sui(SUL) 10,160 27.84
Pirkoh+Loti 15,664 42.92
TOTAL 165,619 453.76
PUNJAB
Dhodak 2,120 5.81
Meyal 518 1.42
Dhurnal 149 0.41
Dakhni 17,279 47.33
Adhi 14,355 39.33
Bhanghali 54 0.15
Sadqal 723 2
Ratana 366 1
Pariwali 5,166 14.15
Pindori 653 1.78
Dhullian 692 1.9
Salsabil 13,807 37.82
TOTAL 55,882 153.1
N.W.F.P
Chanda 2,608 7.14
Mela 5,775 15.82
Makori 8,865 24.3
Gurguri 12,949 35.5
TOTAL 30,197 82.76
SINDH
Hassan 5,414 14.83
Zamzama 68,735 188.32
Sawan 89,453 245.1
Tajjal 4,027 11.03
Qadirpur 175,589 481
Qadirpur(RAW GAS) 15,247 41.77
Qadirpur (DEHYDRATED) 8,345 22.86
Kandhkot 21,464 58.8
Chachar 3,401 9.32
Rehmat 4,513 12.36
Badar 5,272 14.44
TOTAL 401,460 1,100
GRAND TOTAL 653,157 1,789

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2.3.2 Transmission System
• Year Wise Increase in Transmission System

20
 • Transmission Network Map
• Segment-Wise Transmission Break-up
• Province-Wise Transmission Breakup

2.3.2.1 Year Wise Increase in Transmission System

% Age Increase Over % Age Increase
Year Kms
Previous Year from 1993
1993 3,311 - -
1994 3,614 9.15% 9%
1995 3,865 6.95% 17%
1996 4,243 9.78% 28%
1997 4,687 10.46% 42%
1998 4,920 4.97% 49%
1999 5,112 3.90% 54%
2000 5,217 2.05% 57%
2001 5,122 -1.82% 55%
2002 5,405 5.53% 63%
2003 5,759 6.55% 73%
2004 5,776 0.30% 74%
2005 6,121 5.97% 84%
2006 6,195 1.20% 87%
2007 6,625 6.94% 100%
2008 7,016 5.90% 112%
2009 7,347 4.50% 122%

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2.3.3 Distribution System
• Gas Distribution Capacity
• Distribution Network

2.3.3.1 Gas Distribution Capacity

The Distribution System Capacity as on 31.12.2009 is as follow.

CAPACITY (MMCFD)
SR. No. REGION
TOTAL CONTRACTED AVAILABLE
1 Bahawalpur 306 236 70
2 Multan 610 471 139
3 Faisalabad 530 408 122
4 Lahore 909 885 24
5 Gujranwala 316 258 58
6 Islamabad 381 223 158
7 Peshawar 237 172 65
8 Abbottabad 150 134 16
TOTAL 3439 2787 652

The Distribution System Capacity as on 30.06.2009 is as follow.

CAPACITY (MMCFD)
SR. No. REGION
TOTAL CONTRACTED AVAILABLE
1 Bahawalpur 205 234 -29

22
 2 Multan 596 465 131
3 Faisalabad 514 396 118
4 Lahore 821 865 -44
5 Gujranwala 300 240 60
6 Islamabad 370 213.5 156.5
7 Peshawar 229 166 63
8 Abbottabad 148 131.6 16.4
TOTAL 3183 2711.10 471.90

2.3.3.2 Distribution Network

Year Wise Increase In Distribution Network (Status as on 29.02.2008)

Increase Over the Previous

Year Kms % Age Increase
Year
1998 28,661 - -
1999 29,954 1,293 4%
2000 31,477 1,523 5%
2001 32,825 1,348 4%
2002 34,093 1,268 4%
2003 35,814 1,721 5%
2004 38,284 2,470 6%
2005 42,192 3,908 9%
2006 46,671 4,479 10%
2007 51,866 5,195 10%
2008 57,395 5,529 10%

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2.3.4 Year Wise Increase in Gas Consumers
Year Wise Increase in Gas Consumers as on 29.02.2008

No. of % Age Increase Over

Year Increase from Previous Year
Consumers Previous Year
1997-98 1,637,803 - -
1998 -99 1,747,320 109,517 7%
1999 -00 1,887,009 139,689 8%
2000-01 1,986,583 99,574 5%
2001-02 2,113,847 127,264 6%
2002-03 2,208,968 95,121 4%
2003-04 2,340,872 131,904 6%
2004-05 2,516,795 175,923 8%
2005-06 2,723,225 206,430 8%
2006-07 2,953,818 230,593 8%
2007-08 3,102,667 148,849 5%

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2.3.5 Year Wise Increase in Gas Sales

Increase from Previous Year

Year Kms
Vol. in MMCF % Age
1998-99 253,104 - -
1999-00 284,338 31,234 11%
2000-01 308,111 23,773 8%
2001-02 321,957 13,846 4%
2002-03 341,643 19,686 6%
2003-04 452,338 110,695 24%
2004-05 537,086 84,748 16%
2005-06 571,481 34,395 6%
2006-07 576,658 5,177 1%

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2.3.6 Projects

Sr. No Activity DIA (Inch)Length (KM)Commissioned On

D.G Cement Line (Dera Ghazi
1 8 26.00 03.01.2006
Khan)
2 Shakardara- Lachi Line 8 25.50 06.08.2005
TOTAL 51.50
Budgeted Cost (Million Rs.)

2.3.7 Construction Activities in Progress

Sr. DIA Length Commissioned

Activity
No (Inch) (KM) On
1 Rawat – Murree Line 12 58.00 77%
2 Sukho – Rawat Line 16 35.50 23%
Choa – Bestway Cement- D.G Cement –
3 10 23.00 98%
Chakwal Cement Line
4 Makori Line for M/s MOL Pakistan 10 9 -
Badar Gas Field – Qadirpur Gas Field Line
5 8 20.50 99%
for M/s Pakistan Explorations Ltd.
Total 145.50
Budgeted Cost (Million Rs) 1125.00

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2.3.8 Upcoming Construction Activities

DIA Length
Sr. No Activity Commissioned On
(Inch) (KM)
Procurement of Material /
Acquisition of Land and
1 Hattar – Abbottabad Line 16 62.50
Preparation of Design
Drawings in progress
Mian Channun – Hasilpur
2 12 90.00 As above
Line
Hasilpur – Chistaian Mandi
3 8 35.00 As above
Line
4 Lachi – Manjuwala Line 12 85.00 As above
5 Hangu Line 8 35.00 As above
6 Manjuwala – End Point Line 8 195.00 As above
Total 502.05
Budgeted Cost (Million Rs) 4200.00

2.3.9 Future Projects

The conceptual study of Project-IX is underway to carry maximum gas beyond Multan ,
to facilitate gas consumers from all walks of life in central Punjab and Northern areas of
the country. The basic intent of Project-IX is the elimination of bottle necks in SNGPL’s
existing transmission network and to transport gas to independent Power Plants in Punjab
province, through system up-gradation with loop lines and system compression
enhancement, beside construction of pipelines to absorb additional gas available from gas
sources of Potohar region and newly discovered Gurguri-Makori field in Karak District
of NWFP province

2.3.10 Performance

27
 • Performance for the Year (FY 2008-09)
• Performance for the Year (FY 2007-08)
Performance for the Year (FY 2008-09)
2009 2008
(Rupees in Thousand)
No of employees
Operation 6,652 6,916
Project 342 224
Total 6,994 7,140

Gas Sales (in MMCF) 584,895 597,913

Consumers (in numbers) 3,451,142 3,190,181

Customers (in numbers)

Industrial 5,953 5,442
Commercial 52,242 49,176
Domestic 3,358,439 3,101,303
Total 3,416,634 3,155,921

Transmission and Distribution System (in Kilometers)

Transmission main 7,347 7,016
Distribution main and services 67,449 59,951

Performance for the Year (FY 2007-08)

2008 2007
(Rupees in Thousand)
No of employees
Operation 6,916 6,712
Project 224 209
Total 7,140 6,921

Gas Sales (in MMCF) 597,913 576,658

Consumers (in numbers) 3,190,181 2,953,818

Customers (in numbers)

Industrial 5,442 4,425
Commercial 49,176 45,925
Domestic 3101,303 2,869,208
Total 3,155,921 2,919,558

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Transmission and Distribution System (in Kilometers)
Transmission main 7,016 6,625
Distribution main and services 59,951 52,394

2.3.11 Bill types

There are different four types of bill.
1) Normal Bill
2) Provisional Bill
3) Minimum Bill
4) Estimated Bill

2.3.11.1 Normal Bill

Bill is issued as per meter reading supplied by the meter reader and calculated as per rates
provided by govt. for all categories of consumer. Pressure factor is applied for the
calculation of volume of gas consumed for commercial consumers, while pressure,
temperature & super compressibility factor is also applied to work out volume of gas
consumed by Industrial / bulk supply consumers.

2.3.11.2 Provisional bill

When meter reading could not be recorded due to following reasons, a Provisional Bill is
issued to the consumer.
1) Index glass dirty/misty.
2) Water inside meter.
3) Meter covered with dust.
4) Meter covered with bushes.
5) Meter under rain water.
6) Meter installed above normal height.
7) Meter position is not approachable.
8) Meter locked inside the premises.
9) Dog at site.
10) Not allowed by the consumer.

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 11) Premises not found.
These 11 reasons are recorded by meter reader and reflected on your monthly bill.
Provisional bill amount is 110% of the previous bill.
Provisional bill amount is adjusted in next normal bill when proper reading is provided.

2.3.11.3 Minimum bill

Bill is charged as minimum due to zero consumption of gas. Bill is charged as minimum
due to the gas consumption below the minimum consumption limit as per Govt.
notification of minimum charges as defined below (without Meter Rent/GST):

Domestic Rs. 99.74

Commercial Rs. 1046.96
Special Domestic Rs. 99.74
General Industry Rs. 6646.43
Cement Industry Rs. 7657.34
Bulk Domestic Rs. 406.69

It is subject to change

2.3.11.4 Estimated bill

Estimated Bill is charged due to any violation of Gas Connection Rules & Regulation
such as theft or if meter is sticky (Out of Order) and is unable to record the gas passing
through it.
Bill is charged on seasonal annual consumption. In this case average of previous year's
seasonal consumption is used.
There are two types of seasonal average:
Summer Average = Average of ( Mar to Nov).
Winter Average =Average of (Dec to Feb).

30
 Chapter 3
Structure of Finance Department

3.1 Structure of finance department

In the finance department, about 1331 employees are working under the supervision of
chief financial officer and senior general manager finance. In the distribution office

31
Faisalabad, employees are working under the senior area accountant and senior billing
officer. The corporate structure of finance department to ensure accurate, timely, efficient
and effective discharge of accounting functions. The depart; mental head is chief
financial officer. General Manager Accounts and general manager finance are being
working under the umbrella of chief financial officer. Down the line duties and
responsibilities are assigned to chief accountant, deputy chief accountants, senior
accountants, sectional head, executive and support staff. The structure chart of finance
department is given as:

3.1.2 Finance & accounts functions

The finance and accounts department is primarily responsible to keep proper books of
accounts with respect to:

 All sums of money received and expended by the company and the matters in
respect of which the receipt and expenditures takes place.
 All sales and purchases of goods by the company.
 All assets of the company.
 All liabilities of the company.
In pursuit of the achievement of corporate objectives and targets fixed, the accounts
department transacts all the activities of the company in the financial terms, record it with
accuracy, manage to provide requisite funds at minimum cost, plae the surplus funds with
the secured financial institutions in accordance with the approved policies of the board of
directors and on overall basis acts as financial controller by establishing effective and
budgetary controls.
3.1.3 Organization
The corporate structure of sui northern gas pipelines limited provides for establishment of
finance and accounts department to ensure accurate, timely. Efficient and effective
discharge of accounting functions. The department is headed by chief financial officer.
He is assisted by the general manager (finance) and general manager (accounts). Down
line duties and responsibilities have been assigned to chief accountants, deputy chief
accountants, senior accountants, section heads and the support staff.
3.1.3 Accounting for areas

32
3.1.3.1 Introduction
In order to facilitate smooth operation of the area offices imp rest accounts are approved
by the head office for making payments to contractors, suppliers, and other outside
agencies and for staff claims. The cheques sent by head office are deposited in bank
account which is operated jointly by the imp rest holder (area general manager) and the
senior area accountant. All payments in the area are made out of imp rests on the basis of
payments vouchers duly approved by the area general manager and signed by the area
accountant. Each voucher is serially numbered and entered in the imp rest cash book. Re-
imbursement from head office is claimed on the basis of voucher entered in the imp rest
cash book showing the accounts heads/job numbers and the amounts paid. Similarly
receipts are recorded through credit vouchers which are also entered in the imp rest cash
book. The area accountant is also responsible to monitor gas bill collection and its
reconciliation, receive amounts from consumers on account of securities, and cost sharing
jobs and relocation of service line jobs. The request for job cost numbers for cost sharing
cases are also processed by the respective area accountants.

Functions and accounting procedures

 Fixation of imprest lmit _ new areas
 Enhancement of imprest limited
 Approval of imprest
 Imprest payment at areas
 Work orders/contracts
 Supplier’s payments
 Contractor’s payments
 Receipts from outside parties
 Completion of cash book
 Phusical checking of cash and monitoring of bank accounts
 Gas bills collection and security accounts reconciliation
 Issuance of job numbers for cost sharing works
 Pre-audit

33
  Tax deduction
 Books and records
3.1.3.2 Fixation of imprest limit _ new areas
The limit for new imprest is fixed taking into account the future estimated volume of
expenses. The basis considered for this purpose is in transit period / amount and
reimbursement period, which is normallu one third of total expenses in month.
3.1.3.3 Enhancement of imprest limited
The trend of expenses incerred at the area during last one year / 6 months is considered
taking into account the following data for the said period which represent the total
existing limit:
 Expenses incurred
 Bank balance
 Cash in hand
 Outstanding advances
 In transit
3.1.3.4 Approval if imprest
On the request of area accounts, the approval from chief financial officer is obtained and
new bank account is opened with the signatures of competent authority as approved by
the board of directors. For enhancement of imprest, limited the justification on the basis
of required data is prepared and if found feasible the approval from chief financial officer
is obtained and this increase is continuously monitored.
3.1.3.5 Imprest payments at areas
Payments out of imprest are to be made by the area accountants to contractors, suppliers
and for other services and to staff after approval of the competent authority.
3.1.3.6 Work orderd/contractors
Payments are made to contractors for laying distribution network, civil works,
transmission lines, haulage works and for miscellaneous activities. Distribution
contractors for performing various activities are approved by the company for each area
from time to time. Rates for each activity are also approved / revised by the company

34
after every two years. Works orders are issued by the area general manager assigning
work to each contractor. Copies of work orders are sent to accounts department.
In other departments, like projects, transmission and civil contracts / work orders are
awarded on the basis of competitive bidding according to the approved procedures and
copies sent to accounts department.
Similarly contracts for haulage of goods and for hiring of equipment are awarded on
annual basis by purchase & store department according to the purchase & stores
procedures and copies sent to accounts.
 Check that the contract / work order has been approved by the competent
authority.
 Check computation and keep it in an area-wise contractors file.

3.1.3.7 Supplier’s payments

Payment to suppliers against local purchase orders should be checked with the supporting
documents i.e. Local purchase order and receiving statement etc. A monthly bill paid
register should be submitted to head office (bills section) duly reconciled with the
payments debited to sundry creditors account in the imprest cash book.
Contractor payments
Above payments dully approved by the competent authority will be made after due
checking of supporting documents and included in job cost columns of imprest cash
book.
Check that the supporting documents attached to the vouchers/claims are in agreement
with the claim amount and cash memos attached, if any are proper.
Receipts from outside parties
Receipts on accounts of cost sharing charges, service line relocation charges etc. recorded
through credit vouchers showing the appropriate account head. It will be ensured that all
receipt in the form of cheques, demand draft, pay orders and cash received on company
account will be deposited into bank on daily basis. The receipt if any collected after
banking hours is to be deposited in company account on next working day.
Completion of cash book

35
 • All payments vouchers and credit vouchers must be serially numbered accurately
and entered in the imprest cash book. A data control slip should be completed and
attached to the imprest cash book sent to head office for re-imbursement.
• Before sending the imprest cash book for re-imbursement the computations and
balances carried forwarded to next sheets must be confirmed. The imprest cash
book must be signed by area general manager and the senior area accountant.
3.1.3.8 Physical checking of cash and monitoring of bank accounts
• The account should check the cash physically on daily basis at the end of each
day. Cash physically checked should be recorded in a register kept for this
purpose and signed by the cashier and accountant showing the denomination of
notes.
• Duplicate keys for the cash chest will be held and one each will be retained by the
cashier and the accountant/incharge.
• The area accountant must monitor the bank account on continuous basis so that
the balance is kept reconciled. The area accountant sends bank reconciliation by
7th of each month with amount appearing in the cash book.
• The area accountant should monitor the regular receipt of bank statements for
checking and pointing out discrepancies e.g. time barred cheques; bank charges or
some other receipt not recorded in the imprest cash book.
3.1.3.9 Gas bills collection and security accounts reconciliation
• Company has authorized various banks to collect gas bills. As per standing
instructions all banks are required to transfer all collections to company’s main
collection accounts on daily basis. The area accountant is required to obtain bank
statements for each accounts on monthly basis and prepare proper reconciliation
so as to ensure that all funds collected on behalf of the company have been
transferred as per instructions. All outstanding items will be pursued for final
settlement.
• The reconciliation of the gas sales collection account will be submitted to head
office by 15th of each month.

36
 • The area accounts received amounts from the prospective consumers and the
connected consumers under the following heads of accounts.
• Gas connection application fee for domestic and commercial connections.
• Security for domestic, industrial, domestic and special domestic consumers.
• Service line charges.
• Additional security as and when due.
• Re-connection fee.
• A separate security account for depositing the amount collected in connection
with gas connections and other heads as stated above has also been opened in the
area. The accountant is required to collect bank statements for each account on
monthly basis and prepare reconciliation. All outstanding items will pursue for
settlement.
3.1.3.10 Issuance of job numbers for cost sharing works
Company undertakes cost sharing jobs and service-line relocation works on payment by
consumers. Proper job number is slotted by the area accountant so as to record all cost
and facilitate subsequent refund/recovery. On receipt of the completion reports these will
be checked by area accounts and recovery/refund will be arranged.
Pre-audit
Managing director office note 921 dated November 5, 2003 pre audit functions have been
transferred to accounts. The area accountant is responsible for evaluation of all purchases
orders as per procedure. Pre-audit of all contract payments including partial payment
certificate/final payment certificate and other purchases will be carried out as per
company procedure and instructions issued from time to time.
Tax deduction
Deduction of tax should be made according to the relevant section of income tax
ordinance, 2001 keeping in view the different rates applicable to contractors, suppliers
and service contracts.
3.1.3.11 Books and record
• Serial number-wise paid imprest voucher kept in bound form.
• Imprest cash books pertaining to each area.

37
 • Bank reconciliation statements pertaining to cash account.
• Daily cash reconciliation registers.
• Security registers.
• Stock of received goods.
• Serial number and date wise paid and receipt vouchers.
3.1.3.12 Mobilization of funds
Cash mobilization techniques fall into two areas:
• Acceleration of receivables
• Control of disbursements
Receivable are those funds that come into the organization’s treasury. Cash flow can be
expedited

38
 Chapter 4
Financial Statements and Analysis

39
4.1 Balance sheet (Liabilities)

Sui Northern Gas Pipeline Ltd

Balance Sheet
As on June 30,

2009 2008 2007 2006

Equity and Liabilities

Share Capital and Resrves

Authorized share capital

1500000000 (2006: 1500000000)
Ordinary Shares of Rs 10. each 1,500,000, 1,500,000, 1,500,000, 1,500,000,

Issued Subscribed and

paid up capital 5,491,053 5,491,053 5,491,053 4,991,866
Revenue Reserves 10,656,463 11,647,796 10,798,422 10,116,826
Total Equity 16,147,516 17,138,849 16,289,475 15,108,692

Non Current Liabilites

Long Term Financing

Secured 0 62,500 662,500 1,949,084
Unsecured 1,798,312 2,717,963 3,710,181
5,474,096
Security Deposit 11,439,969 9,068,102 7,270,407 5,865,779
Deffered Credit 32,000,133 31,386,548 23,108,412 16,663,770
Deffered Liabilities - - - -
Deffered Tax 8,178,211 7,562,412 6,752,570 6,046,992
Employee benefits 392,249 336,667 298,026 312,654
53,808,874 51,134,192 41,802,096 36,312,375
Current Liabilities
Trade and other payable 49,785,736 27,416,384 22,810,592 22,031,290
Accured Mark up/interst 552,160 396,323 467,452 548,217

40
Short Term Borrowing 950,858 0 0 0
Current portion of long financing 1,102,980 1,561,895 2,281,243 2,559,650
Taxation-net 0 0 0 676,345
52,391,734 29,374,602 25,559,287 25,815,502

Total Liabilities 106,200,608 80,508,794 67,361,383 62,127,877

Contingencies and commitments 0 0 0 0

Total Equity and liabilities 122,348,124 97,647,643 83,650,858 77,236,569

41
4.2 Balance sheet (Assets)

Sui Northern Gas Pipeline Ltd

Balance Sheet
As on June 30,

2009 2008 2007 2006

Non Current Assets

Property Plant and Equipments 78,345,432 62,025,792 50,053,930 43,568,193

Intangible assets 270,845 168,825 0 0
Investment in an associate company 4,900 4,900 4,978 4,900
Long term loans 235,060 224,645 222,310 209,483
Employee Benefits 347,547 357,140 0 0
Long term Deposits and prepayments 7,482 7,138 6,406 7,073
79,211,266 62,788,440 50,287,624 43,789,649
Current assets

Stores and spare parts 2,171,953 2,287,084 1,089,526 1,184,140

Stock in trade- gas in pipelines 783,362 525,370 473,404 445,772
Trade debts 25,706,362 18,757,385 16,229,067 14,517,536
Loan and advances 136,766 148,403 181,414 82,111
Deposits and short term prepayments 93,573 95,428 33,293 31,926
Interest accrued 13,634 40,988 72,756 60,760
Other receivables 11,176,987 2,235,441 1,340,234 980,650
Taxation-net 1,302,429 764,521 134,079 0
Sales tax recoverable 434,915 1,356,339 263,233 743,507
Short term investments 0 511,096 0 0
Cash and bank balances 1,316,877 8,137,148 13,546,228 15,400,518
43,136,858 34,859,203 33,363,234 33,446,920

Total Assets 122,348,124 97,647,643 83,650,858 77,236,569

42
4.3 Profit and Loss Account

Sui Northern Gas Pipeline Ltd

Profit and Loss Account
As on June 30,

Profit & Loss Account 2009 2008 2007 2006

160,714,7 123,404,53 122,091,65 107,897,29
Gross Sale 37 7 2 1
8,219,0 750,49
Add: Differential Margin 94 6 - -
168,933,8 124,155,03 122,091,65 107,897,29
31 3 2 1
151,337,3 109,107,46 108,682,85 94,032,49
Cost of gas sold 39 1 0 5
17,596,4 15,047,57 13,408,80 13,864,79
Gross profit 92 2 2 6
990,1 916,35 828,14
Rental and service income 01 1 0 744,955
Surcharge and interest on gas sales 1,200,8 703,32 673,24
arrears 22 8 1 534,470
1,096,0 790,28 591,35
Amortization of deferred credit 33 9 4 472,879
3,286,9 2,409,96 2,092,73 1,752,30
56 8 5 4
20,883,4 17,457,54 15,501,53 15,617,10
48 0 7 0
Operating Expenses
15,011,5 11,797,77 10,692,06 9,627,07
Distribution cost 29 8 1 6
1,723,2 1,379,08 1,312,98 1,172,86
Administrative expenses 00 0 3 0
16,734,7 13,176,85 12,005,04 10,799,93
29 8 4 6
4,148,7 4,280,68 3,496,49 4,817,16
19 2 3 4
2,975,3 957,19 241,32
Other operating expenses 05 4 4 346,300
1,173,4 3,323,48 3,255,16 4,470,86
14 8 9 4
1,210,0 1,446,56 1,855,11 1,828,39
Other Operating Income 08 8 8 9
2,383,4 4,770,05 5,110,28 6,299,26
Operating profit 22 6 7 3
653,1 789,24 860,71 1,180,20
Finance cost 82 7 5 3

43
 Profit before taxation and share from 1,730,2 3,980,80 4,249,57 5,119,06
associate 40 9 2 0
Share in profit of associate-before 42
tax - 2 78 -
1,730,2 3,980,38 4,249,49 5,119,06
Profit before taxation 40 7 4 0
799,7 1,484,54 1,571,30 1,396,81
Taxation 04 7 7 6
930,5 2,495,84 2,678,18 3,722,24
Profit after taxation 36 0 7 4
1.6 4.5 4.8
Earrings per share- basic and diluted 9 5 8 6.76

4.4 Vertical/Cross-Sectional/Common Size Analysis Techniques

Vertical/Cross-sectional/Common size statements came from the problems in comparing

the financial statements of firms that differ in size.

• In the balance sheet, the assets as well as the liabilities and equity are each
expressed as a 100% and each item in these categories is expressed as a
percentage of the respective totals.
• In the common size income statement, turnover is expressed as 100% and every
item in the income statement is expressed as a percentage of turnover (sales).

44
 4.4 Vertical Analysis
Sui Northern Gas Pipeline Ltd
Vertical Analysis (P&L Account)
As on June 30,
June,30,2006 June,30,2007 June,30,2008 June,30,2009
(Figure in
Profit and loss items percentage)
Gas sales 100 100 100 100
Add / ( Less) : Differential Margin/
(Gas Development surcharge) -1.9 -7.79 0.61 5.11
98.1 92.21 100.61 105.11
Cost of Gas Sold 85.25 81.22 88.41 94.17
Gross Profit 12.85 10.98 12.19 10.95
Rental and Service income 0.69 0.68 0.74 0.62
Surcharge and interest on gas sale arrears 0.5 0.55 0.57 0.75
Amortization of deferred credit 0.44 0.48 0.64 0.68
14.47 12.7 14.15 12.99
Less: operating expenses
Distribution Cost 8.92 8.76 9.56 9.34
Administrative expenses 1.09 1.08 1.12 1.07
10.01 9.83 10.68 10.41
4.46 2.86 3.47 2.58
Other operating expenses 0.32 0.2 0.78 1.85
4.14 2.67 2.69 0.73
Other operating income 1.69 1.52 1.17 0.75
Operating profit 5.84 4.19 3.87 1.48
Finance cost 1.09 0.7 0.64 0.41
Profit before tax and share from associate 4.74 3.48 3.23 1.08
share in profit of associates-before tax 0 0 0 0
profit before taxation 4.74 3.48 3.23 1.08
less: tax 1.29 1.29 1.2 0.5
profit after tax 3.45 2.19 2.02 0.58
4.4.1 Vertical Analysis
Sui Northern Gas Pipeline Ltd
Vertical Analysis (Balance Sheet)
As on June 30,

June June June June

30,2006 30,2007 30,2008 30,2009
BALANCE SHEET ITMES (Figre in percentage)
ASSETS
Non - current assets
Property, plant and equipment 56.41 59.79 63.66 64.03
Intengible assets 0 0.02 0.03 0.22

45
Investment in associate 0.01 0.01 0.01 0
Long term loans 0.27 0.27 0.23 0.19
Employee benefits 0 0.07 0.37 0.28
Long term deposits and prepayments 0.01 0.01 0.01 0.01
56.7 60.16 64.3 64.74
Current Assets
Stores and spare parts 1.53 1.3 2.34 1.78
Stock in trade-gas in pipelines 0.58 0.57 0.54 0.64
Trade debts 18.8 19.39 19.21 21.01
Loans and advances 0.11 0.22 0.15 0.11
trade deposits and short term
prepayments 0.04 0.04 0.1 0.08
interest accrued 0.08 0.09 0.04 0.01
Other receivables 1.27 1.58 2.29 9.14
Income tax recoverable-net 0 0.16 0.78 1.06
Sales tax recoverable 0.96 0.31 1.39 0.36
Short term investments 0 0 0.52 0
Cash and bank balances 19.94 16.19 8.33 1.08
43.3 39.84 35.7 35.26
Total assets 100 100 100 100

4.4.2 Vertical Analysis

Sui Northern Gas Pipeline Ltd

Vertical Analysis (Balance Sheet)
As on June 30,
EQUITY AND LIABILITIES
Share capital and reserves
Authorized share capital
(1,500,000,000 ordinary shares of Rs.10
each)
Issued subscribed and paid up share
capital 6.46 6.56 5.62 4.49
Revenue reserves 13.1 12.9 11.93 8.71
Total Equity 19.56 19.47 17.55 13.2
Non-Current Liabilities
Long term financing
-Secured 2.52 0.79 0.06 0
-Unsecured 7.09 4.43 2.78 1.47
Security deposits 7.59 8.69 9.29 9.35
Deferred credit 21.57 27.61 32.14 26.15
Deferred tax 7.83 8.07 7.74 6.68
Employee bebefits 0.4 0.4 0.34 0.32
47.01 49.99 52.37 43.98

46
Currenat Liabilities
Trade and other payable 28.52 27.26 28.08 40.69
Interest / mak up accrued 0.71 0.56 0.41 0.45
Current portion of long term financing 3.31 2.73 1.6 0.78
Taxation-Net 0.88 0 0 0.9
33.42 30.54 30.08 42.82
Total Liabilities 80.44 80.53 82.45 86.8
Contingencies and commitments 0 0 0 0
Total Equity and Liabilities 100 100 100 100

Interpretation
From the vertical analysis above, we can compare the percentage mark-up of asset items
and how they have been financed. The strategies may include increase/decrease the
holding of certain assets. We may as well observe the trend of the increase in the assets
and liabilities over several years.

4.5 Horizontal Financial Statement Analysis

This technique is also known as comparative analysis. It is conducted by setting

consecutive balance sheet, income statement or statement of cash flow side-by-side and
reviewing changes in individual categories on a year-to-year or multiyear basis. The most
important item revealed by comparative financial statement analysis is trend.
A comparison of statements over several years reveals direction, speed and extent of a
trend(s). The horizontal financial statements analysis is done by restating amount of each
item or group of items as a percentage.

Such percentages are calculated by selecting a base year and assign a weight of 100 to the
amount of each item in the base year statement. Thereafter, the amounts of similar items
or groups of items in prior or subsequent financial statements are expressed as a
percentage of the base year amount. The resulting figures are called index numbers or
trend ratios. From the balance sheet statement in exhibit 1. The following indexed
balance sheet can be established.

47
4.5 Horizontal Analysis

Sui Northern Gas Pipeline Ltd

Horizontal Analysis (P&L Account)
As on June 30,

June June June

30,2006 June 30,2007 30,2008 30,2009
(Figure in
Profit & loss items Percentage)
Gas Sales 168 190 192 250
Add / (Less):Differential Margin / 13580 -1071 -11731
(Gas Development Surchage) 2920 175 193 263
165 188 207 288
Cost of Gas Sold 175 116 130 152
Gross Profit 120
Rental and Service Income 117 130 143 155
Surchage and Interest on Gas
Sales Arrears 101 128 134 228
Amortization of Deferred Credit 132 165 220 305
119 118 133 159
Less: Operating Expenses
Distribution Cost 124 138 152 194
Administrative Expenses 125 139 146 183
124 138 152 193
109 79 97 94
Other Operating Expenses 176 123 486 1512
106 77 79 28
Other Operating Income 450 457 356 298
Operating Profit 136 110 103 51
Finance Cost 122 89 81 67
Profit before Taxation 140 116 109 47
Less:Taxation 102 115 109 59
Profit after Taxation 162 117 109 41
Earning per Share-Basic and
Diluted (Rupees) 147 106 99 37

48
4.5.1 Horizontal Analysis

Sui Northern Gas Pipeline Ltd

Horizontal Analysis (Balance Sheet)
As on June 30,

June June June June 30

BALANCE SHEET ITEMS 30,2006 30,2007 30,2008 2009
ASSETS (Figure in percentage)
Non - current assets
Property, plant and equipment 118 135 168 212
Intengible assets 0 0 0 0
Investment in associate 100 102 100 100
Long term loans 92 98 99 103
Employee benefits 0 0 0 0
Long term deposits and prepayments 113 102 114 119
118 124 169 213
Current Assets
Stores and spare parts 197 182 381 362
Stock in trade-gas in pipelines 162 172 190 284
Trade debts 149 167 193 264
Loans and advances 58 129 105 97
Trade deposits and short term prepayments 91 95 273 268
interest accrued 175 209 118 39
Other receivables 274 369 626 3128
Income tax recoverable-net 0 0 0 0
Sales tax recoverable 0 0 0 0
Short term investments 0 0 1108 0
Cash and bank balances 181 159 96 15
169 169 176 218
Total Assets 136 147 172 215

4.5.2 Horizontal Analysis

Sui Northern Gas Pipeline Ltd

Horizontal Analysis (Balance Sheet)
As on June 30,

EQUITY AND LIABILITIES

Share capital and reserves
Authorized share capital
(1,500,000,000 ordinary shares of Rs.10 100 100 100 100

49
each)
Issued subscribed and paid up share
capital 100 110 110 110
Revenue reserves 173 137 199 182
Total equity 139 150 158 149
Non-Current Liabilities
Long term financing 39 13 1 0
-Secured 91 62 45 30
-Unsecured 132 164 204 258
Security deposits 206 285 388 395
Deferred credit 109 122 136 147
Deferred tax 16 17 17 20
Employee benefits 117 134 164 173
Current Liabilities
Trade and other payable 168 174 209 380
Interest / mark up accrued 354 301 256 356
Short term borrowings 0 0 0 0
Current portion of long term financing 159 142 97 68
Taxation-Net 912 0 0 0
173 171 197 351
Total liabilities 135 146 175 231
Total Equity and Liabilities 136 147 172 215

Interpretation
As basis of Analysis, the analyst may seek variables which seem to improve or
deteriorate and bring a challenge to the stakeholders in their various decisions. Example
from the previous table one can ask the following questions?

• Why is there an increase in the stock of the company? Has the company changed
its inventory policy?
• Why did taxation increase so tremendously? Were there any changes in taxation?
Is it reflected by the increase in sales? Profit?
• Why is there an increase in the fixed assets and at the same time decrease in the
long-term debt? How were these assets financed?

50
4.6 RATIO
Ratio Analysis
ANALYSIS
Ratio analysis is one of the techniques of financial analysis where ratios are used as a
yardstick for evaluating the financial condition and performance of a firm. Analysis and
LIQUIDITY RATIOS
interpretation of various accounting ratios gives skilled and experienced analyst a better
understanding of the financial condition and performance of the firm than what he could
have obtained only through a perusal ofActivity
financial statements.
Ratios

leverage Ratio

PROFITABILITY
RATIOS

51
4.6.1 LIQUIDITY RATIOS

Liquidity represents the ability of a company to efficiently and economically

accommodate deposits withdrawal as well as fund increase in assets. A company has a
liquidity potential when it has the ability to obtain sufficient funds in a timely manner at a
reasonable cost. Illiquidity is a primary factor leading to a Company’s failure whereas
high liquidity helps otherwise weak institutions to remain funded during the period of
difficulty.

• Liquidity refers to the ability of a firm to meet its short-term financial obligations
when and as they fall due.
• The main concern of liquidity ratio is to measure the ability of the firms to meet
their short-term maturing obligations. Failure to do this will result in the total
failure of the business, as it would be forced into liquidation.

52
 I. Current ratio
II. Quick Asset to Deposit ratio
4.6.1.2 CURRENT RATIO
The Current Ratio expresses the relationship between the firm’s current assets and its
current liabilities.
Current assets normally include cash, marketable securities, accounts receivable and
inventories. Current liabilities consist of accounts payable, short term notes payable,
short-term loans, current maturities of long term debt, accrued income taxes and other
accrued expenses (wages).

Current Ratio :- Current Assets

Current Liabilities
2009 2008 2007 2006
Current Asset 43,136,858 34,859,203 33,363,234 33,446,920

Current Liabilities 52,391,734 29,374,602 25,559,287 25,815,502

Current Ratio 0.82 1.19 1.31 1.30

Curremt Ratio

1.40
1.20
1.00
Ratio

0.80
Curremt Ratio
0.60
0.40
0.20
0.00
2009 2008 2007 2006
Year

INTERPRETATION
This ratio shows that whether the current assets of the company are Sufficient to meet the
current liabilities or not. In 2006 it was 1.30 that shows low liquidity but comparatively
better other years because this ratio is above standard that is 2. In 2007 it was 1.19, that

53
shows that firm use financing leverage in 2007 and approximately to 0.82 in 2008, that
shows that firm take more short term loans from market.

4.6.1.2 QUICK RATIO OR TEST ACID RATIO

Measures assets that are quickly converted into cash and they are compared with current
liabilities. This ratio realizes that some of current assets are not easily convertible to cash
e.g. inventories.
The quick ratio, also referred to as acid test ratio, examines the ability of the
business to cover its short-term obligations from its “quick” assets only (i.e. it
ignores stock). The quick ratio is calculated as follows

Quick Ratio:- Quick assets

Current Liabilities

2009 2008 2007 2006

43,136,85 34,859,20 33,363,23
Current Assets 8 3 4 33,446,920

Inventory 783,362 525,370 473,404 445,772

52,391,73 29,374,60 25,559,28

Current Liabilities 4 2 7 25,815,502

Acid Test Ratio 0.81 1.17 1.29 1.28

54
 Acid Test Ratio

1.40
1.20
1.00
Ratio

0.80
Acid Test Ratio
0.60
0.40
0.20
0.00
2009 2008 2007 2006
Year

INTERPRETATION
This ratio shows that how much quick assets are available to meet the demand of the
accountholders. This ratio was 1.29% in 2007 and decreased to 1.17% in 2008. It shows
that in 2007 the immediate liquidity position of the company was comparatively weak.
But it is also more decreases in 2009.

4.6.1.3 Net Working Capital

Current Assets - Current Liabilities

2009 2008 2007 2006

Current Asset 43,136,858 34,859,203 33,363,234 33,446,920

Current Liabilities 52,391,734 29,374,602 25,559,287 25,815,502

Net Working Capital (9,254,876) 5,484,601 7,803,947 7,631,418

55
 Net Working Capital

9,000,000
8,000,000
7,000,000
6,000,000
5,000,000
Rs

Net Working Capital

4,000,000
3,000,000
2,000,000
1,000,000
0
2009 2008 2007
Year

4.6.2 Activity Ratio

If a business does not use its assets effectively, investors in the business would rather
take their money and place it somewhere else. In order for the assets to be used
effectively, the business needs a high turnover.

Unless the business continues to generate high turnover, assets will be idle as it is
impossible to buy and sell fixed assets continuously as turnover changes. Activity ratios
are therefore used to assess how active various assets are in the business.

Note: Increased turnover can be just as dangerous as reduced turnover if the business
does not have the working capital to support the turnover increase. As turnover increases
more working capital and cash is required and if not, overtrading occurs.

4.6.2.1 Receivable Turn Over Ratio

Annual Credit Sale

-------------------------
Total Receivable

56
 2009 2008 2007 2006
Receivable 25,706,362 18,757,385 16,229,067 14,517,536

Sale 160,714,737 123,404,537 122,091,652 107,897,291

Average
Receivables 22,231,874 17,493,226 15,373,302 14,517,536

Receivable Turn
Over 7.2 7.1 7.9 7.4
Receivable Turn Over

8.2
8.0
7.8
Turn over

7.6
7.4 Receivable Turn Over
7.2
7.0
6.8
6.6
2009 2008 2007 2006
Year

INTERPRETATION
This ratio measures the number of times, on average, receivables (e.g. Accounts
Receivable) are collected during the period.
In 2008 & 2009 this ratio is decreased .07 & .06 from last year 2007. It shows that firm
has change its account receivable policy.
4.6.2.2 Inventory Turnover Ratio

Cost of Goods Sold

----------------------------
Average Inventory

2009 2008 2007 2006

Cost of goods sold 151337339 109107461 108682850 94032495

Inventory 783,362 525,370 473,404 445,772

Average Inventory 654366 499387 459588 445,772

Inventory Turn Over Ratio 231.27 218.48 236.48 210.94

57
 Inventory TurnOver

240.00
235.00
Turn over

230.00
225.00
220.00
Inventory Turn Over
215.00
210.00
205.00
200.00
195.00
2009 2008 2007 2006
Year

Interpreatation

This ratio measures the stock in relation to turnover in order to determine how often the
stock turns over in the business.
It indicates the efficiency of the firm in selling its product. It is calculated by dividing he
cost of goods sold by the average inventory.

4.6.2.3 Total Asset Turn Over

Sales
--------------
Total Assets

2009 2008 2007 2006

Total sale 160714737 123404537 122091652 107897291

Total Assets 122,348,124 97,647,643 83,650,858 77,236,569

Total Asset Turn Over 1.31 1.26 1.46 1.40

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 Total Asset Turn Over

1.50
1.45
Turn Over

1.40
1.35
Total Asset Turn Over
1.30
1.25
1.20
1.15
2009 2008 2007 2006
Year

Interpretation

Asset turnover is the relationship between sales and assets

• The firm should manage its assets efficiently to maximize sales.

• The total asset turnover indicates the efficiency with which the firm uses all its
assets to generate sales.
• It is calculated by dividing the firm’s sales by its total assets.
• Generally, the higher the firm’s total asset turnover, the more efficiently its assets
have been utilized.

4.6.2.4 Fixed Asset Turn Over

Total sale / Fixed Asset

2009 2008 2007 2006

Total sale 160714737 123404537 122091652 107897291

Fixed Asset 79,211,266 62,788,440 50,287,624 43,789,649

Fixed asset turn over 2.03 1.97 2.43 2.46

59
 Fixed Asset Turn Over

3.00

2.50
Turn over

2.00
1.50 Fixed Asset Turn Over

1.00

0.50
0.00
2009 2008 2007 2006
Year

4.6.3 Leverage ratio

• The ratios indicate the degree to which the activities of a firm are supported by
creditors’ funds as opposed to owners.
• The relationship of owner’s equity to borrowed funds is an important indicator of
financial strength.
• The debt requires fixed interest payments and repayment of the loan and
legal action can be taken if any amounts due are not paid at the appointed time. A
relatively high proportion of funds contributed by the owners indicates a cushion
(surplus) which shields creditors against possible losses from default in payment.

Note: The greater the proportion of equity funds, the greater the degree of
financial strength. Financial leverage will be to the advantage of the ordinary
shareholders as long as the rate of earnings on capital employed is greater than the
rate payable on borrowed funds.
The following ratios can be used to identify the financial strength and risk of the
business.

60
4.6.3.1 Debt to Share holder equity Ratio

Total Debt
-----------------------
Equity

2009 2008 2007 2006

Total Debt 106,200,608 80,508,794 67,361,383 62,127,877

Shareholders Equity 16,147,516 17,138,849 16,289,475 15,108,692

Debt to Equity Ratio 658% 470% 414% 411%

Leverage / Debt Ratios

700%
600%
Percentage

500%
400%
Leverage / Debt Ratios
300%
200%
100%
0%
2009 2008 2007 2006
Year

INTERPRETATION
This ratio indicates the extent to which debt is covered by shareholders’ funds. It reflects
the relative position of the equity holders and the lenders and indicates the company’s
policy on the mix of capital funds.
This ratio shows that how much company is financed more by debt than its own equity.
From 2006 to2009 it goes on raising which shows that gradually company’s operations
are more financed by its debts than by equity, this is due to increases in short term
finances

4.6.3.2 Interest Coverage

61
 Earning Before Interest And Tax
---------------------------------------------
Interest Expense

2009 2008 2007 2006

EBIT 2383422 4770056 5110287 6299263

Interest Expense 653182 789247 860715 1180203

Interest Coverage Ratio 3.65 6.04 5.94 5.34

Interest Coverage

7.00
6.00
5.00
Ratio

4.00
Interest Coverage
3.00
2.00
1.00
0.00
2009 2008 2007 2006
Years

Interpreatation

This ratio measure the extent to which earnings can decline without causing financial
losses to the firm and creating an inability to meet the interest cost.

• The times interest earned shows how many times the business can pay its interest
bills from profit earned.
• Present and prospective loan creditors such as bondholders, are vitally interested
to know how adequate the interest payments on their loans are covered by the
earnings available for such payments.
• Owners, managers and directors are also interested in the ability of the business to
service the fixed interest charges on outstanding debt.

62
The company’s major forms of credit are non-interest bearing (trade creditors) which
results in the business enjoying very healthy interest coverage rates. In 2006 the company
could pay their interest bill 5.34 times from earnings before interest and tax. However
this is a massive drop from 5.94 times and in 2001 and 3.69 times in 2009.

4.6.4 PROFITABILITY RATIOS

Profitability is the ability of a business to earn profit over a period of time.

Although the profit figure is the starting point for any calculation of cash flow, as
already pointed out, profitable companies can still fail for a lack of cash.

Note: Without profit, there is no cash and therefore profitability must be seen as a critical
success factors.

• A company should earn profits to survive and grow over a long period of time.
• Profits are essential, but it would be wrong to assume that every action initiated
by management of a company should be aimed at maximising profits, irrespective
of social consequences.

The ratios examined previously have tendered to measure management efficiency and
risk.

Profitability is a result of a larger number of policies and decisions. The profitability

ratios show the combined effects of liquidity, asset management (activity) and debt
management (gearing) on operating results. The overall measure of success of a business
is the profitability which results from the effective use of its resources.

Following profitability ratios have been calculated

I. Gross Profit Margin Ratio

II. Net Operating Income Ratio
III. Net Profit Ratio
IV. Return on equity

63
4.6.4.1 Gross Profit Margin Ratio

Gross profit
------------------ X 100
sale

2009 2008 2007 2006

Sale 160,714,737 123,404,537 122,091,652 107,897,291

Gross Profit 17,596,492 15,047,572 13,408,802 13,864,796

Gross Profit
Ratio 11% 12% 11% 13%

Gross Profit Ratio

13%
13%
12%
12%
11% Gross Profit Ratio
11%
10%
10%
2009 2008 2007 2006

Interpretation

• Normally the gross profit has to rise proportionately with sales.

• It can also be useful to compare the gross profit margin across similar businesses
although there will often be good reasons for any disparity.

64
 • The ratio above shows the increasing trend in the gross profit since the ratio has
decreased from 13% in 2006 to 13% on 2007. This indicates that the rate in
increase in cost of goods sold are less than rate of increase in sales, hence the
increased efficiency.

4.6.4.2 Net Operating Margin

Operating Income
------------------------ x 100
Sale

2009 2008 2007 2006

Sale 160,714,737 123,404,537 122,091,652 107,897,291

Operating Profit 2383422 4770056 5110287 6299263

Operating Profit Ratio 1% 4% 4% 6%

OperatingProfitMargin

6%

5%

4%

3%
Operating
Profit
2%
Margin
1%

0%
2009 2008 2007 2006

Interpreation
It is a measurement of what proportion of a company's revenue is left over, before taxes
and other indirect costs (such as rent, bonus, interest, etc.), after paying for variable costs
of production as wages, raw materials, etc. A good operating margin is needed for a
company to be able to pay for its fixed costs, such as interest on debt. A higher operating
margin means that the company has less financial risk.

65
In 2006 company has ratio 6% but it has been constantly decreasing with time being to
1%, which very danger for firm.

4.6.4.3 Net Profit Margin

Net Profit after tax x 100

Net Sales

2009 2008 2007 2006

160,714,73 123,404,53 122,091,65
Sales 7 7 2 107,897,291

Net Profit after taxes 930536 2495840 2678187 3722244

Net Profit Margin 1% 2% 2% 3%

Net Profit Margin

4%
4%
3%
Percentage

3%
2% Net Profit Margin
2%
1%
1%
0%
2009 2008 2007 2006
Year

INTERPRETATION

66
This is a widely used measure of performance and is comparable across companies in
similar industries. The fact that a business works on a very low margin need not cause
alarm because there are some sectors in the industry that work on a basis of high turnover
and low margins, for examples supermarkets and motorcar dealers.
What is more important in any trend is the margin and whether it compares well with
similar businesses.
Net profit ratio indicates that how much net sales are contributing towards generating Net
Profit. In 2006 it was 3% and decreased to 2% in 2007. It is decreasing constantly and in
2009, it is only 1%. It shows the firm crises.

4.6.4.4 Return on Equity

This ratio shows the profit attributable to the amount invested by the owners of the
business. It also shows potential investors into the business what they might hope to
receive as a return. The stockholders’ equity includes share capital, share premium,
distributable and non-distributable reserves. The ratio is calculated as follows:
Net Profit
-------------------
Equity

2009 2008 2007 2006

Net profit after tax 930536 2495840 2678187 3722244

16,147,51 17,138,84 16,289,47

Share holder equity 6 9 5 15,108,692

Return on equity 6% 15% 16% 25%

67
 Return on Equity

30%
25%
20%
Percentage

15% Return on Equity

10%
5%
0%
2009 2008 2007 2006
Ye ar

INTERPRETATION
The ratio shows that how much equity is contributing towards generating Net Income. In
2006 it was 25% and decreased to 16% in 2007 but in 2008 it also decreased to 16% in
2009 it was too much decreased to 6%. This shows that in organization increases debt
financing.

4.6.4.5 Earning Per Share

2009 2008 2007 2006

Net profit after tax 930536 2495840 2678187 3722244
No. of shares
outstanding 549105 549105 549105 499187

Earning Per Share 1.69 4.55 4.88 7.46

68
 Earning Per share

8.00
7.00
6.00
E.P.S

5.00
4.00 Earning Per share
3.00
2.00
1.00
0.00
2009 2008 2007 2006
Year

4.6.4.6 Break Up value per share

Share holder's equity / No. of share outstanding

2009 2008 2007 2006

Share holder's equity 16,147,516 17,138,849 16,289,475 15,108,692
No. of share out standing 549105 549105 549105 499187

Break up value per share 29.41 31.21 29.67 30.27

Break Up value per share

31.50

31.00
Break Up value

30.50
Break Up value per
30.00
share
29.50

29.00
28.50
2009 2008 2007 2006
Years

69
CHAPTER NO.5
SWOT ANALYSIS

70
5.1 SWOT ANALYSIS

5.1.1 Internal and External factors.

The Internal component of Analysis is concerned with the basic
strengths and weaknesses of the organization. Thus, it depicts the
internal environment of the company. The strengths of the company may
be its financial or human resources, processes, operational methods,
marketing strategies, segmentation techniques or any expertise that the
company may feel as its core competencies. Contrary to this, any
discrepancies in these factors, at the same time, may become the
weaknesses of the company. Hence, it is the internal environment of the
company that shapes its business strategies and provides direction to
survive in the marketplace.

The external component deals with the factors that the company faces in
its external competitive environment. These factors are categorized as
opportunities available for the company in the market place and the
threats strained by its competitors. The opportunities of the company
may by its ability to satisfy the ever arising needs of its customers better
than its competitors, new available markets, room for setting new
operations, falling of barriers due to globalization trend etc. If a firm fails
to avail the opportunities as soon as they arrive, these opportunities
become threats for that company. This is because your competitors will
avail that opportunity in their first attempt and attain first mover
advantage over you.

SWOT Analysis is a popular technique used to analyze some company’s

present business situation. It provides us with an overview of company’s
major strengths and its critical weaknesses. The external opportunities and
threats that the company faces in the external environment are also
highlighted in this approach.

71
5.2 SWOT Analysis
5.2.1 Strengths:
 Government Organization
 High Cumulative Customer retention rate since the start of operations
 Sustained growth rate of annual sales turnover.
 Consistent Quality
 Vertically integrated.

 Excellent market image in the local and international market.

 Highly qualified management.

 Adequate financial resources.

 Adopting information technology.

 Skilled Labor.

 Broad and motivational vision.

5.2.2 Weaknesses:

 High employee turnover

 Low production capacity.

 De-motivated Staff.

 Less promotional activities.

 Non-Corporative culture.

 Insufficient benefits for the employees.

 Stereotype machinery for processing.

 Communicational gap among different departments.

72
  No Proper Training to employees

 Manual Work

 Mineral Stocks

5.2.3 Opportunities:

 Can expand its division such as finding new minerals

 Can reduce the cost by proper utilization of resources.

 Can hire well-educated and experienced staff.

5.2.4 Threats:
 New plans to take gas from outside the country
 Buyer need and demand changes.
 Political instability.
 Changing geopolitical situation.
 Change of government policies.
 Less stocks of minerals

73
 CHAPTER NO.6
CONCLUSION AND RECOMMENDATION

74
6.1 CONCLUSION

The company earned Rs 1,730,240 thousand pre tax profit, which is decrease than the last

year. The revenue from sales was Rs 160,714,737 thousands during the year, which is

also decrease than the previous year. This year the company has taken a tax refund of Rs

799,704 thousands from the tax authority on different accounts. Company’s current ratio

also decreased 1.19 to 0.82 further more the company has tried its best optimize

utilization of all its available resources to the maximum level resulting in improvement of

the inventory turnover ration from 218.48 To 231.27 the company need to be taken

effective measures to recover its old situation and improve its financial position.

6.2 RECOMMENDATIONS
Before joining this organization I know a little about the organization work, its working
system and environment, so I learned a lot from this experience. Based on my experience
& observation regarding the operations and policies of organization, there are some
recommendations which include short term as well as long term issues for the
improvement.

6.2.1 Assess the Performance of employees

There is no efficient method introduced by organization for his assessment of
performance of employees. Promotions are completely relying on higher management
like managers .’s there can be some sort of favoritism. So to avoid all this, there should
be a proper method to judge the employees.
6.2.2 Improve Information Technology System

75
Sui Gas Northern Ltd. should immediately improve its Information Technology System.
The soft wares currently in use should be made error free as it is the need of the hour.
6.2.3 Computerized Accounting System
As far as accounting is concerned, although the entire system is computerized, but there
still involves lots of paperwork. So this should be minimized b acquiring more advanced
accounting software
6.2.4 Job Rotation
There is no rotation of employees within departments and cross departments. So the top
management should immediately start thinking in terms of rotating the employees in
various departments, as this transforms work force into human capital.
6.2.5 Distribute Work Equally
Management should distribute work equally among different employees. Some of the
employees are overburdened while some sections are overstaffed.
6.2.6 Improve its Website
Sui Gas Northern Ltd needs to improve its website. More information relating to financial
performance and sale of the organization should be available on the website.
6.2.7 Evolve Management Policy
Sui Gas Northern Ltd should evolve a very serious management policy to attract multi
national corporations as its clients. This action, if actualized, would not only prove to be
highly profit generating, but it would also contribute a lot towards Gohar Textile image
building.
6.2.8 Advertise
One of the most pressing needs of the time is to advertise Sui Gas Northern Ltd in the
electronic media. Sui Gas Northern Ltd has not, till date, employed advertisement in
electronic media as a full fledge marketing tool. I think it is high time that organization
does this
6.2.9 Market Survey
The management should make the market survey time to time to get more and latest
information about the market factors like the price, demand, current consumer trends etc.

76
Reference and source used

The following sources are used for preparing this internship report
1- Annual Report 2007, 2008, 2009
2- Monthly report of financial year 2007,2008, 2009
3- Sui Northern Gas website (www.sngpl.com.pk)
4- Staff Members of Sui Gas Northern

77