Diversion of LNG to households: PD says circular debt likely to soar to Rs398bn by 2025
- Petroleum Division tells parliamentary committee circular debt can be contained only through price rationalisation
ISLAMABAD: The Petroleum Division has projected that diversion of LNG to households will further add to the circular debt that will reach Rs398 billion in the year 2025. The circular debt is estimated at Rs104 billion in the current financial year.
Due to the government’s policy to subsidise oil and gas sector, the circular debt reached Rs1.7 trillion (80 percent increase in last three years), which can be contained only through price rationalisation, the Petroleum Division has proposed to a parliamentary committee on Thursday.
Senate Standing Committee on Petroleum met under its chairman, Mohammad Abdul Qadir.
The parliamentary panel on Thursday was briefed that gas supply chain is on the brink of collapse. By June 2021, the gas chain differential margin (GDS and LNG diversion) is growing at a much faster pace than the power chain circular debt (growth of 18 times in five years against 3.3 times in power circular debt).
In June 2021, the GDS/ RLNG diversion and others reached to Rs794 billion and negative GDS and RLNG diversion differential accumulated to all time high of Rs66.5 billion (18 times increase over 2016).
In term of percentage of GDS/ LNG to power sector circular debt grew to 29 percent from five percent.
To improve the gas situation in the country, the official of the Petroleum Division said, gas companies put moratorium on increasing household gas connections to tackle rising GDS.
The Oil and Gas Regulatory Authority (OGRA) law has been amended.
Models of WACOG are being finalised with concerned stakeholders including Sui companies and the OGRA. While implementing the WACOG, rationalisation of gas prices will an important aspect to be covered for moving towards full cost recovery or budgeted subsidy for low-end consumers.
In the briefing, acting CEO/ Managing Director Pakistan LNG Limited (PLL) Masood Nabi said the receivable of PLL reached to approximately Rs143 billion and facing challenging in spot purchase of LNG due to volatility in international market and global high demand and supply gas.
He said, “The government is engaged with Russian and Saudi Arabia for term contracts to meet the future demand of the LNG”.
He further said that although the term contracts were signed with Gunvor and ENI, Gunvor was in default of full cargo for January 2022 and declared force majeure for March delivery and ENI was also in default on full cargo for March delivery. He said two default supplier of LNG would pay 30 percent penalty and the price of imported gas increased by 300 percent. He further said that the LNG trading companies were monitoring Russia-Ukraine war and not signing any agreements, adding observing PPRA rules in spot purchase of LNG was also a challenge.
Copyright Business Recorder, 2022
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