Market Competitive Intensity (MCI): Pakistan

Datamonitor's MCI Index offers a robust framework for measuring the development of utility Market Competitive Intensity. The MCI assessment draws on nine underlying metrics grouped into three broad clusters: Market framework; Supplier Push; Customer Pull.

Report Highlights
MCI scores are calculated using two different methods. The first, the simple weighted average (additive) measure shows overall competitive intensity. The second, the multiplicative method, is more complex. It prevents markets with an overly wide spread of underlying raw scores from exerting undue influence over, or skewing, the final result.

Liberalisation, energy pricing issues and environmental concerns will remain key drivers of gas and power market dynamics throughout the MCI forecast period.
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DATAMONITOR VIEW 1
CATALYST 1
SUMMARY 1
ANALYSIS 2
Introduction: Datamonitor's MCI Index offers a robust framework for measuring the development of energy Market Competitive Intensity 2
The MCI Index shows how attractive a particular market is to new entrants in terms of the competitive environment 3
The MCI assessment draws on nine underlying metrics grouped into three broad clusters: market framework, supplier push, customer pull 3
The MCI Index measures the development of 20 diverse Asia Pacific gas and power markets 4
The MCI Index assesses markets in December 2007, and on July 1, 2010, in addition to driving a market switching forecast 4
Each of the nine pillars has an assessment scale to allow for the comparison of diverse markets (see appendix for more details) 5
Two differing overall MCI scores are calculated to ensure full clarity of results 5
A simple weighted average (additive) measure shows overall competitive intensity 5
A weighted multiple (multiplicative) measure shows overall competitive intensity 5
The MCI framework has a number of applications for your organization 6
Context: Pakistan's energy markets continue to move towards a more market based structure 7
Development of Pakistan's power market does not keep pace with other markets in the region 7
Development of Pakistan's gas market is minimal over the forecast period 8
Power MCI: Pakistan's power score is curtailed by particularly weak Customer Pull metrics 9
Market Framework scores show little development over the forecast period 9
Effectiveness of regulator [2007: 5/10 2010: 6/10] 9
Ease of third-party access [2007: 2/10 2010: 2/10] 9
Effectiveness of balancing and data transfer [2007: 2/10 2010: 3/10] 10
Supplier Push factors are the main drivers of Pakistan's overall score 10
Wholesale market fragmentation [2007: 5/10 2010: 7/10] 10
Retail market fragmentation [2007: 7/10 2010: 7/10] 10
Traded market maturity [2007: 1/10 2010: 1/10] 10
Customer Pull metrics remain very minimal over the forecast period 11
Access to market information and assistance [2007: 1/10 2010: 2/10] 11
Consumer representation [2007: 1/10 2010: 1/10] 11
Propensity to switch [2007: 0/10 2010: 1/10] 11
Gas MCI: Competitive intensity in the gas market will remain limited over the forecast period 12
Market Framework factors will remain largely at the lower end of the scale 12
Effectiveness of regulator [2007: 2/10 2010: 3/10] 12
The Oil and Gas Regulatory Authority (OGRA) was set up to regulate the oil and gas sector in Pakistan. The body supersedes the Director General of Gas (DGG), which used to regulate the sector under the authority of the Ministry of Petroleum and Natural Resources. 12
The OGRA is still in a transitional stage; it does not mandate separate licensing or tariff setting for the different activities in the gas sector, which include transmission, distribution, and supply, nor does it provide for interface such as network codes. 12
Furthermore, the government still plays a major role in regulatory affairs such as retail tariff setting, undermining the independence of the body. 12
The selected chairman and the three members of the regulator are also mainly from government or state-owned T&D entities. OGRA is likely to remain tightly constrained by the government, if not directly influenced by it, over the forecast period. 13
Ease of third-party access [2007: 1/10 2010: 1/10] 13
At present, there is a closed access system in Pakistan's gas market: the T&D players buy gas from producers, ship it in their networks and sell it to consumers in their franchise areas. The principle of TPA was first introduced under the 2001 Petroleum Policy. The OGRA ordinance enables the authority to arrange for TPA through the development of rules that are consist with policy guidelines to be provided by Pakistan's government. The licensing rules require that there should be no discrimination in the allocation of excess capacity to different parties, but it does not make TPA compulsory. The tariff rules focus on the tariff adjustment process and procedures, and do not provide support for the separate pricing of transmission services. As such, effective TPA remains a distant prospect in Pakistan beyond the forecast period. 13
Effectiveness of balancing and data transfer [2007: 5/10 2010: 6/10] 13
Arrangements for balancing in Pakistan have been legislated for and, even if not put into extensive practice, a defined framework exists. 13
Supplier Push metrics are the highest scoring factors in Pakistan's gas score 13
Wholesale market fragmentation [2007: 8/10 2010: 8/10] 13
Retail market fragmentation [2007: 4/10 2010: 5/10] 13
Customer Pull metrics remain weak over the forecast period 13
Access to market information and assistance [2007: 2/10 2010: 4/10] 13
Consumer representation [2007: 0/10 2010: 2/10] 14
Propensity to switch [2007: 1/10 2010: 1/10] 14
Outlook: Competitive intensity is likely to improve marginally in the short term 15
MCI scores 16
APPENDIX 19
Definitions 19
Ask the analyst 24
LIST OF TABLES
Table 1: Market Competitive Intensity, Pakistan 2007-10 16
Table 2: MCI additive, Asia Pacific 2007-10 17
Table 3: MCI multiplicative, Asia Pacific 2007-10 18
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Table 1: Market Competitive Intensity, Pakistan 2007-10 16
Table 2: MCI additive, Asia Pacific 2007-10 17
Table 3: MCI multiplicative, Asia Pacific 2007-10 18
Figure 1: MCI assessment scale 3
Figure 2: MCI assessment framework 3
Figure 3: MCI market coverage 4
Figure 4: MCI scales 5
Figure 5: MCI Applications 6
Figure 6: Asia Pacific power Market Competitive Intensity, 2007-10 7
Figure 7: Asia-Pacific gas Market Competitive Intensity, 2007-10 8
Figure 8: Power Market Competitive Intensity Index, Pakistan 9
Figure 9: Gas Market Competitive Intensity, Pakistan 12
Figure 10: Market Competitive Intensity, Pakistan 15
Figure 11: Scale for MCI assessment, effectiveness of regulator 19
Figure 12: Scale for MCI assessment, ease of third-party access 20
Figure 13: Scale for MCI assessment, effectiveness of balancing and data transfer 20
Figure 14: Scale for MCI assessment, wholesale market fragmentation 21
Figure 15: Scale for MCI assessment, retail market fragmentation 21
Figure 16: Scale for MCI assessment, traded market maturity 22
Figure 17: Scale for MCI assessment, access to market information and assistance 22
Figure 18: Scale for MCI assessment, consumer representation 23
Figure 19: Scale for MCI assessment, propensity to switch 24
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