E&P firms seek release of Rs1.5tr dues

Oil and gas exploration and production (E&P) companies have expressed serious concern over alleged default on payments by the public gas utilities and have sought the government's intervention to resolve the matter.

These companies have drawn attention of the state towards outstanding dues of Rs1.5 trillion payable by the gas utilities, which resulted in scaling back development projects and required intervention from the government to release the overdue amount.

The receivables of exploration companies had amounted to Rs224 billion in June 2015, which piled up to Rs1.5 trillion in September 2025. These dues are exclusive of the late payment surcharge.

The Pakistan Petroleum Exploration and Production Companies Association (PPEPCA), in a letter sent to the Petroleum Division secretary, said that the default on payments by gas utilities had put a strain on the financial position of E&P companies.

The exploration firms supply gas extracted from different fields to public utilities Sui Northern Gas Pipelines Ltd (SNGPL) and Sui Southern Gas Company (SSGC) for onward distribution to energy consumers. "We would like to reiterate that Pakistan's upstream oil and gas sector forms the backbone of the national economy. In recent times, this sector has been producing 2,684 mmscfd (million standard cubic feet per day) of gas, meeting over 30% of the country's primary energy needs," emphasised PPEPCA.

However, it added, the sector was witnessing a downward trend, driven primarily by persistent default by the state-owned gas distribution companies in settling the overdue payments to E&P firms. Consequently, the country's gas production has experienced a significant decline from its peak of four billion cubic feet per day.

PPEPCA claimed that SNGPL had to pay Rs718 billion to oil and gas exploration companies whereas SSGC owed Rs730 billion.

The E&P companies impacted by the delay in payments included Al Haj Pakistan Exploration Ltd, Government Holdings Private Ltd, Kufpec, Mari Energies, OGDC, Orient Petroleum, Polish Oil and Gas Company, Pakistan Oilfields Ltd, Pakistan Petroleum, Prime and United Energy Pakistan.

"The balance provided does not reflect the total receivables of upstream companies as some of the companies have not provided the required data/information," said the association in the letter.

As evident from the statistics, it added, the receivables balance continued to accumulate over 10 years, exerting significant financial pressure on the upstream companies.

The industry body stressed that it was important to note that during the same period several E&P companies exited Pakistan. "It is deeply concerning that no material improvement has been observed in the outstanding receivables during fiscal year 2024-25, despite four consecutive consumer gas price increases notified on November 1, 2023, February 1, 2024, July 1, 2024 and January 1, 2025."

Furthermore, the latest price adjustment in July 2025 also failed to help make any notable progress in improving the receivables position. This persistent challenge underscores the urgent need for additional structural and financial measures to address the liquidity constraints facing the gas utility companies and to revitalise the petroleum exploration and production sector as a whole, said PPEPCA. According to the association, the terms and conditions outlined in the Petroleum Concession Agreements and Gas Sale Agreements require gas buyers to make payments within 30 days of receiving the invoice.

However, the ageing analysis of receivables reveals a concerning trend, which showed an increase of over Rs990 billion, representing 64% of the total outstanding amount, which had been overdue for more than one year.

The continuing default by Sui companies in settling the overdue invoices has severely strained the sector, triggering a critical cash flow crisis, said the association.

As a result, exploration and development activities have been scaled back, leading to a continuous decline in gas supplies.