Finance ministry calls for gas supply to FFBL

ISLAMABAD:

The Ministry of Finance has asked the Petroleum Division to allocate gas supply to the Fauji Fertiliser Bin Qasim Limited (FFBL) plant from a new discovery made by Pakistan Petroleum Limited (PPL).

Earlier, the caretaker government approved an increase in the allocation of gas for third parties from 10% to 35% to tackle the growing circular debt and help exploration companies improve their cash flow.

Exploration and production (E&P) firms have welcomed this initiative as they are trapped in circular debt due to delay in payments by the public gas utilities. They prefer third parties for gas supply where chances of stopping payments are very slim.

In a recent letter sent to the Petroleum Division, the finance ministry said that the proposal of allocating 15 million cubic feet of gas per day (mmcfd) to FFBL from a new PPL discovery, ie, 100% allocation, may be re-examined in light of the recent amendments to the Petroleum (Exploration and Production) Policy, 2012, approved by the Council of Common Interests (CCI).

CCI had decided to increase the share of gas provision to third parties from 10% to 35% by taking provinces on board.

The Special Investment Facilitation Council (SIFC) had also agreed that the gas sector should be opened to the private sector to control the circular debt that had crossed Rs2 trillion in the oil and gas sector.

The chief executive officer of an exploration company told The Express Tribune that the increase in allocation for third parties was a good initiative of the government as it would provide a better price for E&P companies.

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He said that the gas sector was entangled in the circular debt but the entry of private sector would not only create competition but would also result in fetching better prices.

“This initiative will prove to be an incentive for the exploration companies, encouraging them to drill more wells to find fresh hydrocarbon reserves and reduce dependence on liquefied natural gas (LNG) imports,” the CEO said.

Over the past few years, exploration activities in the country had slowed down, constrained by the circular debt that dented the cash flow of E&P companies.

Earlier, PPL withdrew a proposal of allocating gas to Sui Southern Gas Company (SSGC) due to circular debt fears and asked the federal government to provide gas to FFBL.

In a recent meeting, PPL said that the allocation of Jhim East X-1 discovery to FFBL presented a more economically viable option, considering that the fertiliser producer was likely to make timely payments, thereby mitigating the circular debt crisis afflicting PPL alongside other E&P companies.

The circular debt had been growing due to delayed and non-payment of invoices by the government buyers.

The Ministry of Industries had repeatedly expressed concern in the recent past over the reduced gas supply to FFBL and requested the Petroleum Division to take appropriate measures to ensure adequate supplies, which would lead to uninterrupted urea production.

Published in The Express Tribune, March 7^th, 2024.

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