E&P Firms Warn of Production Suspensions

The Pakistan Petroleum Exploration and Production Companies Association (PPEPCA) has issued a warning, stating that the non-payment of dues by Sui gas companies has reached an alarming Rs1,500 billion as of March 15, 2024. This substantial debt, coupled with recent massive gas tariff increases, is hindering further exploration and production activities in the country.

In a letter addressed to Petroleum Minister Dr Musadik Malik on April 17, 2024, the PPEPCA highlighted the liquidity crisis faced by Exploration and Production (E&P) firms. Despite significant hikes in gas tariffs, Sui gas companies have failed to make required payments, leading to a severe cash flow crunch for E&P companies. The letter emphasizes that if corrective action is not taken promptly by government authorities to ensure speedy payments by SNGPL and SSGC, E&P firms may have to reduce or suspend production operations, potentially causing a gas shortage.

The letter also outlines the impact of delayed payments on exploration and development activities. Out of the planned 23 exploration wells for the year, only 9 were initiated by February 2024. Additionally, only 19 out of 42 available rigs are operational, with a notable reduction in seismic activities. Development wells are being put on hold, leading to a loss of around 300 MMscfd of gas production.

The total outstanding payments owed by gas companies to E&P firms have surged to Rs2.84 trillion ($1.2 billion), with foreign companies bearing a significant portion of this debt. These delayed payments pose a major obstacle to upstream companies’ ability to invest in their assets and contribute to the country’s energy sector growth. The gas companies are urged to settle their dues promptly to enable E&P firms to continue their operations and investment activities effectively.

Story by Khalid Mustafa

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