Sales of liquefied natural gas (LNG) are experiencing an excessively high level of circular debt, which has Pakistan State Oil (PSO) concerned that this may potentially disrupt the nation’s whole energy supply chain.
The oil marketing behemoth PSO stated in a letter addressed to Sui Northern Gas Pipelines Limited’s (SNGPL) managing director that unpaid balances related to LNG sales to the public gas utility have reached worrying heights, endangering the seamless operation of the whole energy supply chain.
The PSO management expressed concern over the worryingly low payments made against SNGPL’s LNG supplies since the beginning of the fiscal year 2024, which has increased PSO’s receivables by a net amount of Rs49 billion. “This is in continuation to the numerous letters and correspondences relating to outstanding payment against supply of LNG,” the management said.
PSO now owes SNGPL a total of Rs 550 billion in receivables. The oil marketing business stated, “We would like to reiterate that PSO’s cash flow situation is deteriorating rapidly due to SNGPL’s continued default in payments and PSO is incurring huge financial charges on financing the growing receivables.”
“PSO is experiencing a severe liquidity crisis as a result of this, which could cause the nation’s energy supply chain to break down.”
To guarantee a steady supply of electricity across the nation, PSO management asked the gas utility to promptly settle the whole amount owed—Rs 550 billion—for LNG deliveries by utilizing all of the available means.
PSO is a major importer of LNG from Qatar, supplying SNGPL with the fuel to suit the demands of different customers.
In order to address the energy crisis during the previous winter, SNGPL diverted LNG to domestic users in accordance with orders from the federal government. This was mostly done in Punjab, where local gas output was extremely low.
To solve the shortfalls expected in fiscal year 2024–2025, it has been predicted that the cost of diverting LNG to domestic users will be $1 billion.
Due mostly to LNG delivery, state-owned gas businesses are already in severe financial distress as a result of their Rs710 billion circular debt.
Because re-gasified LNG was supplied to state-owned gas utilities, Pakistan LNG Limited (PLL) has a circular debt of Rs142 billion, while PSO has a debt of Rs568 billion.
The major players recently made it known. During a public hearing in Lahore, the All Pakistan Textile Mills Association (Aptma) North Zone stated that they worried the diversion of RLNG to domestic customers would cost a whopping $1 billion in the financial year 2024–25, which would equate to 209 million cubic feet of gas per day (mmcfd).
In 2024–2025, SNGPL plans to divert 80,155 British thermal units of RLNG to its customers at a cost of Rs297,913 million, or $1 billion. This plan has been authorized by the federal government and the Economic Coordination Committee (ECC).
Due to a protracted delay in applying the weighted average cost of gas, the circular debt in the RLNG chain has increased.
The weighted average cost of the gas bill, which the Pakistan Tehreek-e-Insaf (PTI) administration had received approval for from parliament, was contested in the Sindh High Court.
The weighted average cost has been partially adopted by the Oil and Gas Regulatory Authority (Ogra), but not entirely. Therefore, the $1 billion would either be added to the circular debt or collected from customers.
To satisfy its income needs, SNGPL is requesting a significant rise in gas prices, which would take effect on July 1, 2024.
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