Pakistan State Oil (PSO) has expressed concerns that the circular debt tied to the liquefied natural gas (LNG) supply chain, already amounting to Rs447 billion, is projected to rise further.
During a recent company briefing on PSO’s performance and operations for the initial nine months of the fiscal year 2022-23, worries were brought up about the escalating LNG-linked circular debt. The state-controlled oil marketing behemoth underlined that despite the recent hike in gas prices reducing circular debt in the wellhead gas segment, the LNG segment persists in creating substantial challenges for the company’s future operations.
The current status of PSO’s receivables and payables as of June 22, 2023, indicates considerable outstanding sums. It awaits payment of Rs447.29 billion from Sui Northern Gas Pipelines Limited and Rs180.89 billion from the power sector, including GENCOs/Central Power Purchasing Agency, Hubco, and Kapco. PSO is also owed Rs97.07 billion by Pakistan International Airlines and the Pakistani government, which includes pending amounts from PIA and exchange rate differential claims related to FE-25 loans.
Conversely, PSO owes a total of Rs211.92 billion. This includes obligations to refineries such as Pak Arab Refinery, Pakistan Refinery Limited, National Refinery, Attock Refinery, Byco, and Enar, as well as L/C, Kuwait Petroleum Company, and LNG payments totaling Rs179.60 billion.
During the corporate briefing, management acknowledged that the recent gas price hike has somewhat alleviated the circular debt in the wellhead sector. Nonetheless, they raised concerns about the problems caused by the LNG sector. While addressing these issues is underway, the company predicts persistent challenges.
PSO emphasized its active engagement in discussions with the government to guarantee the viability of the oil marketing industry. These dialogues include discussions on reducing the turnover tax, which currently sits at 0.5% for oil marketing companies.
The performance of PSO for 9MFY23 indicated a decrease in after-tax profit due to inventory losses caused by declining international oil prices, higher borrowing costs, and a more substantial effective tax rate.
