PSO grapples with escalating receivables, crossing Rs800bn mark

Pakistan State Oil (PSO) faces an ongoing challenge as its receivables surpass the unprecedented Rs800 billion mark, attributed to delayed payments from clients. The company's debt has escalated notably since its foray into the liquefied natural gas (LNG) market.

The surge in receivables began with PSO's involvement in the LNG market, particularly with a public gas utility, which owes Rs519 billion for imported LNG supplies.

Despite a recent significant increase of up to 139% in gas prices by the caretaker government, aimed at addressing circular debt, the debt continues to rise, especially due to heightened demand for LNG during the winter season.

Under a government-to-government (G2G) arrangement with Qatar Petroleum, PSO entered into an agreement for LNG imports, adding to the financial burden. Currently, PSO is grappling with the task of recovering Rs802 billion from its clients, a substantial increase from Rs362 billion in August 2021.

Among the major defaulters are power generation companies, with total outstanding payments of Rs150.8 billion. Hubco owes Rs29.5 billion, while Kapco has liabilities amounting to Rs5 billion. Pakistan International Airlines (PIA) is another significant defaulter, accumulating Rs27.9 billion in unpaid dues for jet fuel supplied by PSO.

In addition to outstanding client payments, PSO is awaiting the recovery of Rs8.9 billion from the government, attributed to price differential claims. The accumulating receivables are now impacting the company's ability to settle its dues with oil refineries, resulting in payables rising to alarming levels.

PSO's outstanding payments to refineries include Rs26.6 billion to Pak-Arab Refinery Company (Parco), Rs8.4 billion to Pakistan Refinery Limited, Rs4.1 billion to National Refinery Limited, Rs6.9 billion to Attock Refinery Limited, Rs1.7 million to Byco, and Rs1 billion to Enar.

As the country's largest oil importer, PSO holds agreements with Kuwait Petroleum, with an outstanding payment of Rs104 billion for Letters of Credit opened for oil and LNG imports.

Despite these financial challenges, PSO's financial results demonstrate resilience and strength across its diverse portfolio amid a challenging economic environment and ongoing pandemic impacts.