Karachi, December 28, 2022 (PPI-OT): Pakistan Oil and Gas: Gas Circular Debt on the mend

Recent government estimates point towards the gas circular debt to have increased to ~PkR900bn by Nov’22, compared to ~PkR719bn as of Mar’22. The companies majorly affected by the circular debt include: OGDC, PPL, SNGP, SSGC, and PSO.

The stock of receivables on OGDC and PPL’s books has increased from a collective ~PkR306bn at the end of FY18 to ~PkR892bn at the end of the Sep’22 quarter. With the mounting receivable burden on the companies, exploration activity has been subdued, leading to an inability to arrest the fall in production.

Gas production in the country has fallen from 3,997MMCFD in FY18 to 3,390MMCFD in FY22. This comes at a time when the demand for gas and energy is increasing.

The government has finally taken notice of the situation in the gas sector and constituted a team to address the circular debt situation. However, the agenda is a short-term fix, aimed to address the circular debt balance thus far.

From the vantage of E and P companies, specifically OGDC and PPL, any resolution of the receivables on the companies’ balance sheets would result in valuations being unlocked for the juggernauts.