The PM tried to investigate the reduction of gas supply

The PM tried to investigate the reduction of gas supply

Prime Minister Shehbaz Sharif has ordered an inquiry into the reduction of gas supply to public gas utilities due to delays in payments.

Sources told The Express Tribune that the prime minister intervened because the gas utility’s debt had risen to $600 million, which it had to pay to foreign oil and gas exploration companies.

Earlier, the association of oil and gas exploration and production (E&P) firms had discussed the matter with the Petroleum Division, seeking an immediate solution. Sources said that the E&P company informed the Petroleum Division that the supply of 150 million cubic feet of gas per day (mmcfd) has been blocked due to payment issues. However, it has now emerged that the reduced gas volume has been increased to 300 mmcfd.

E&P companies have told the federal government that the gas utility’s debt to foreign firms has soared to $600 million and called for a tariff differential subsidy of Rs75 billion to avert the collapse of Pakistan’s upstream petroleum sector.

In a letter written to the petroleum minister, the Pakistan Association of Petroleum Exploration and Production Companies claimed that priority was given to the import of liquefied natural gas (LNG) instead of increasing gas exploration efforts in the country. It argues that delayed payments are a significant impediment to upstream companies’ ability to pump investment into their assets. “This issue has resulted in a reduction of 300 mmcfd of gas supply due to low drilling activity.”

The association called for different measures to be taken to prevent the collapse of Pakistan’s upstream petroleum sector. It asked for a budget or tariff differential subsidy of at least Rs75 billion for Sui Southern Gas Company (SSGC) and Sui Northern Gas Pipelines Limited (SNGPL) to partially bridge the accumulated revenue shortfall.

The subsidy will make it easier for them to pay upstream companies, which in turn will be able to meet their operating expenses and carry out exploration and development works designed to maintain and increase oil and gas production in the country.

It asked the government to direct the State Bank of Pakistan (SBP) to allocate foreign exchange for payments to foreign E&P companies in an equitable manner.

It also outlined the need to start work on an underground gas storage facility to avoid a reduction in natural gas supply. In the letter, the association drew attention to the critical situation occurring in the upstream oil and gas sector.

“Our industry is facing complex challenges that require urgent action. Chief among them is the alarming amount of receivables, which currently stands at Rs1,500 billion, of which over $600 million is owed to foreign companies.” It shows that companies are seeing a significant decline in domestic oil and gas production, with the shortfall being offset by expensive energy imports, particularly LNG, resulting in a growing energy shortage.