Oil and Gas Development Company (OGDC) has faced a massive loss of Rs43 billion during financial year 2024-25 due to curtailment of indigenous gas supply in the face of liquefied natural gas (LNG) imports.
Pakistan buys LNG from Qatar and its demand has gone down as power producers have of late become reluctant to take LNG deliveries.
The LNG sale-purchase agreements feature 100% take-or-pay clauses for receiving LNG supplies from Pakistan State Oil (PSO) and Pakistan LNG Limited (PLL).
The Petroleum Division believes that the Power Division is responsible for the gas glut following changes in the LNG sale-purchase agreements. It was of the view that the Power Division had changed the agreements and reduced the offtake guarantee.
Gas supply agreements with power plants had been executed at a minimum 66% take-or-pay, but they were later revised to 50%, effective from January 1, 2025.
The private sector has been struggling for months to take gas supplies under third-party arrangements as public utilities are reluctant to allocate gas to third parties.
The government had approved an increase in gas allocation for third parties from 10% to 35% in January this year but gas companies were not able to implement the decision.
The private sector has also offered to take the entire supply from oil and gas exploration companies, which has been curtailed due to LNG imports.
In a corporate briefing held on Wednesday, the OGDC management said that the curtailment of domestic gas supply due to surplus LNG resulted in an accumulated loss of Rs43 billion during financial year 2024-25.
The management pointed out that gas curtailment by Sui Northern Gas Pipelines Limited (SNGPL), driven by excess LNG, caused an estimated revenue loss of Rs40-43 billion during FY25.
"Had this not been the case, earnings would have been higher, with hydrocarbon production estimated at 32,709 bpd (barrels per day) of oil and 743 mmcfd (million cubic feet per day) of gas compared to actual volumes of 30,919 bpd and 652 mmcfd," it said.
Topline Securities had hosted a conference call following the release of FY25 results. The company declared the highest-ever dividend in FY25 – Rs5 per share for the last quarter and Rs15.05 per share for the full year.
The OGDC management expects cash flow from Uch as part of power sector's circular debt resolution very soon. Regarding the gas-sector circular debt, it mentioned that the government was seriously considering the issue and a roadmap could be expected this year.
Hydrocarbon production from the Wali block is expected to commence in two months with initial flows projected between 25-35 mmcfd of gas and 2,500-3,500 barrels of oil per day. For FY27, the company has set a production target of 50 mmcfd of gas and 5,000 bpd of oil.
The Spinwam field (35% owned by OGDC) is also expected to come online shortly, following the resolution of line issues faced by the well.
According to the management, the first phase of Abu Dhabi National Oil Company's (Adnoc) block has been completed while production is expected to begin in FY28/29. It expects a capital expenditure of Rs50-60 billion in FY26, excluding the investment in the Reko Diq copper and gold mining project.
High-risk regions such as Balochistan and Khyber-Pakhtunkhwa are the key exploration focus for the company as the management highlighted that they were actively pursuing licences in those areas. Despite the prevailing security challenges, the company believes there is substantial potential that can be effectively exploited.
OGDC currently has three development and compression projects underway, namely Dakhni, KPD-TAY and Uch, which together are likely to add around 737 mmcfd to gas production capacity.
"We maintain our 'buy' stance on OGDC. The company is currently trading at an FY26/FY27F PE (price-to-earnings ratio) of 6.3/6.1x," Topline said.
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