Delayed payments from Sui companies threaten gas production 

Following significant increases in gas tariffs, the Sui companies have yet to make payments to Exploration and Production (E&P) companies, resulting in outstanding debts totaling Rs1,500 billion as of March 15, 2024. 

As per a news report, this financial backlog is obstructing further exploration and production efforts within the country.

The total debt owed by the gas companies to E&P firms has escalated to Rs2.84 trillion ($1.2 billion), with SSGC and SNGPL accountable for Rs1,500 billion of this amount, including over $600 million due to foreign companies. 

This delay in payments poses a significant challenge to the upstream companies’ investment capabilities, with local E&P firms awaiting payments of Rs1,343 billion.

This concern was expressed in a letter dated April 17, 2024, from the Pakistan Petroleum Exploration and Production Companies Association (PPEPCA) to Petroleum Minister Dr. Musadik Malik. 

The letter calls for urgent government intervention to address the liquidity crisis of E&P firms, which has worsened despite the tariff hikes.

The E&P companies have warned that they may reduce or halt production, which could lead to a significant gas shortage unless the government ensures prompt payments by SNGPL and SSGC. 

The letter highlighted that the gas utility companies have failed to settle even the basic monthly invoices following the tariff increase. 

The association urged the government to provide immediate financial support to these struggling entities to maintain their operational capacity and fulfill obligations to foreign oil and gas companies, which are protected by sovereign guarantees.

The liquidity issues have forced E&P companies to cut back on exploration and development activities. By February 2024, only 9 of the planned 23 exploration wells had been drilled. 

Currently, only 19 out of 42 available rigs are operational, and there is a notable decrease in seismic activities. Development wells are also being deferred, reducing gas production by approximately 300 MMscfd.