Major projects under threat: OGDC seeks ministry’s help as circular debt strains finances

Work on oil and gas exploration projects like Kunner-Pasakhi and Uch-II may be affected.


Zafar Bhutta November 19, 2011

ISLAMABAD:


The Oil and Gas Development Company (OGDC) has sought intervention of the Ministry of Petroleum and Natural Resources to come out of the circular debt mountain which has severely affected its finances as well as work on development projects, including some important ones which hold key to easing energy shortages in the country.


OGDC is currently working on two major oil and gas exploration projects – Kunner-Pasakhi and Uch-II, along with some other projects which require financing of over $600 million.

OGDC, a public sector concern, is a major victim of the inter-corporate debt in the energy chain from refineries to power producers and perhaps the only company that has not to make major payment to any organisation.

According to sources, OGDC’s receivables on account of crude oil and natural gas supply have shot up to about Rs113 billion including late payment surcharge of Rs20 billion which are stuck with refineries and gas distribution companies.

OGDC Managing Director Basharat Mirza told The Express Tribune that oil refineries and gas companies were reluctant to pay their dues on crude oil and natural gas supply and that compelled OGDC to approach the petroleum ministry for its assistance in clearance of outstanding payments.

“At present, we have funds to carry out oil and gas development projects, but the situation will get worse after June if dues are not cleared,” he said, adding OGDC was working on different exploration projects which required investment of over $600 million.

Gas companies are also under immense pressure to ensure uninterrupted supply to different sectors. Even Sui Northern Gas Pipelines Limited (SNGPL) is facing court cases filed by different parties over gas outages.

Sources said the delay in implementing development projects of national importance would have repercussions for the economy with respect to meeting energy demand in the long run.

They said if OGDC’s receivables continued piling up and serious attention was not paid to resolve the issue, the company would not be able to ensure regular supply of crude oil and natural gas.

OGDC is in the process of developing five new oil and gas fields in a bid to produce 400 million cubic feet of gas per day (mmcfd) and 500 tons of liquefied petroleum gas (LPG) per day to mitigate the energy crisis. Around 8,000 to 9,000 barrels of oil per day will also be produced from these fields.

Of the five fields, development of Zin field, located in Balochistan, has been delayed for the last two decades. Continuous work on the field, which has estimated gas reserves of six to seven trillion cubic feet, will help OGDC initiate work on four other blocks.

Among other fields, Uch-II is expected to produce 160 mmcfd of gas per day while Kunner-Pasakhi and Tando Allahyar project will produce 280 mmcfd of gas and 350 tons of LPG.

Published in The Express Tribune, November 20th, 2011.

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