ISLAMABAD: While the ministry of Petroleum and Natural Resources is pushing for increased activities for oil and gas exploration to increase production, the main upstream oil and gas companies have complained that the mounting circular debt has created serious financing problems to execute new exploration projects.
An official of the petroleum ministry told Dawn on Saturday that both the public sector oil and gas exploration and production companies were spending heavily on financial charge as they had to borrow higher amounts from commercial banks for operational expenditures.
The receivables of the state-owned Oil and Gas Development Company Limited (OGDCL), the country’s largest oil producing company, have reached to staggering Rs120 billion as the refineries are failing to clear their dues.
“Similarly, the receivables of Pakistan Petroleum Limited (PPL), the largest gas producer in country, was around Rs40 billion,” said the ministry official. He said the company officials had complained that their cost of financing was Rs109 million in the first six months of the current fiscal year, compared to Rs63 million in the same period last fiscal year.
“That is because the company is taking more loans now as the payments from the gas companies and power producers are being delayed,” the official said, “This tight financial position has led to delays in the execution of projects.”
Meanwhile, an OGDCL official said that due to high circular debt the company was reluctant to make bold decisions in view of higher financial risk involved. “This business of exploring oil and gas requires risk taking as there are more chances of well going dry,” the OGDCL added.
Under the circumstances, the company is facing problems to arrange around Rs52 billion financing for development of fields at Kunner Pasakhi, Uch-11 and Jhal Magasi.
“We are managing the routine operations but initiating new projects require additional financing which is actually further burdening the company under the loans and the issues of returns are still unresolved,” OGDCL officials said.
The main sufferer of the inter-corporate circular debt was the oil and gas sector as the state-owned oil marketing company, Pakistan State Oil (PSO) was failing to clear its dues to the refineries and the refineries were not paying to the oil and gas producers for the crude oil they purchased.
PSO’s receivables from the power sector mainly the electricity producers had reached to Rs166.43 billion on Saturday, and they complained that the electricity distribution companies were not paying them.
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