ISLAMABAD: The oil and gas exploration companies have warned the government that their financial default was eminent as the outstanding amount against the state has almost reached Rs1.5 trillion.

The Pakistan Petroleum Exploration and Production Companies Association (PPEPCA) has written to Petroleum Minister Musadik Malik stating that the upstream oil and gas sector is in a critical situation.

“Our industry is confronting a complex array of challenges that require urgent action. The alarming amount of outstanding receivables from SSGC and SNGPL currently stands at Rs1.5tr, of which over $600 million is payable to foreign companies,” the PPEPCA letter said.

It added that delayed payments were a significant barrier to upstream companies’ ability to invest in their assets. The association has said that as a result of these delays, Pakistan was witnessing a marked decline in indigenous oil and gas production. The shortfall was being balanced by costly energy imports, especially LNG, as well as growing energy shortages.

The upstream oil and gas sector has also highlighted that a severe cash flow crisis was forcing companies to drastically cut exploration and development activities.

“Till February 2024, out of the planned 23 exploration wells for the year, only nine were spud, while only 19 out of the available 42 rigs were operational in the country and there was a substantial reduction in seismic activities too,” PPEPCA has said.

The issue is undermining the confidence of investors and creditors, hindering the necessary capital flow and technology for essential exploration and developmental activities.

The letter said that no new international upstream company has invested in any block or opportunity on offer over the past few years, while several international E&P companies have exited the country.

Published in Dawn, May 5th, 2024