PM seeks probe into reduction in gas supplies

Prime Minister Shehbaz Sharif has ordered probe into the curtailment of gas supply to the public gas utilities because of delay in payments.

Sources told The Express Tribune that the premier intervened as payables of the gas utilities had mounted to $600 million, which they had to pay to foreign oil and gas exploration companies. Earlier, an association of oil and gas exploration and production (E&P) firms had taken up the matter with the Petroleum Division, seeking its immediate resolution. Sources said that E&P companies informed the Petroleum Division that supply of 150 million cubic feet of gas per day (mmcfd) had been curtailed owing to the payment issues. However, now it has emerged that the volume of curtailed gas has been increased to 300 mmcfd. E&P companies have told the federal government that the payables of gas utilities to foreign firms have surged to $600 million and called for allocating 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 Petroleum Exploration and Production Companies Association claimed that preference was being given to liquefied natural gas (LNG) imports instead of ramping up efforts for gas exploration in the country. It argued that delayed payments were becoming a significant barrier to the ability of upstream companies to pump investment into their assets. “This issue has resulted in a reduction of 300 mmcfd of gas supply due to low drilling activities.”

The association called for taking different measures to stave off the collapse of Pakistan’s upstream petroleum sector. It sought a budgetary grant or tariff differential subsidy of at least Rs75 billion for Sui Southern Gas Company (SSGC) and Sui Northern Gas Pipelines Limited (SNGPL) for partially bridging the accumulated revenue shortfall. The subsidy will facilitate them in paying the upstream companies, which will, in turn, be able to meet their operating expenditures and carry out planned exploration and development work for sustaining and enhancing oil and gas production in the country.

It asked the government to give directives to the State Bank of Pakistan (SBP) for allocating foreign exchange for payments to foreign E&P companies in an equitable manner. It also underscored the need for initiating work on underground gas storage facilities to avoid the curtailment of indigenous gas supplies. In the letter, the association drew attention towards a critical situation unfolding in the upstream oil and gas sector. “Our industry is confronting a complex array of challenges that require urgent action. Foremost among these is the alarming amount of outstanding receivables, which currently stand at a staggering Rs1,500 billion, of which over $600 million is payable to foreign companies.” It pointed out that companies were witnessing a marked decline in domestic oil and gas production, with the shortfall being balanced by costly energy imports, especially LNG, resulting in growing energy shortages.