ISLAMABAD: A high level Inter-Ministerial Committee (IMC) on petroleum sector, headed by the Foreign Minister/ Deputy Prime Minister Senator Ishaq Dar has directed Petroleum and Power Division to reassess the plan for settlement of circular debt (CD) through cash/ non-cash adjustments, where possible, for cleansing of balance sheets, sources close to Petroleum Minister told Business Recorder.

A similar plan was prepared by the caretaker Minister for Power and Petroleum, now SAPM on Power, Muhammad Ali, which was turned down by the International Monetary Fund (IMF).

The Committee which met on August 17, 2024, in the Ministry of Foreign Affairs, had also directed the Petroleum Division to ensure RLNG is not diverted to domestic sector and evaluate if some volumes of RLNG can be packaged with intended 3rd party sales to reduce the financial burden on public sector entities, sources close to Petroleum Minister told Business Recorder.

Discos add Rs596bn to circular debt

The meeting was attended by private and public sector members of the committee including Ministers for Petroleum, Finance & Revenue and Power. Heads of various E&P companies and Secretaries of relevant ministries/ divisions also attended the meeting.

Petroleum division gave a briefing on issues like, circular debt, integrated planning, ease of doing business, on-shore and off-shore fiscal regime, implementation of recently introduced amendments in Petroleum Policy 2012 and various aspects of current LNG imports.

The forum after threadbare deliberations took following decisions:(i) Petroleum & Power Division to jointly develop an Integrated Energy Plan with the help of renowned international consultants and complete the exercise by December 2024;

(ii) Petroleum Division to suggest appropriate amendments in OGRA Ordinance to introduce a mechanism for gas tariff adjustments on a monthly or quarterly basis to mitigate further accumulation of circular debt within the gas sector;

(iii) Petroleum and Power Division to reassess the plan for settlement of circular debt through cash/ non-cash adjustments, where possible, for cleansing of balance sheets and bring the final position in next meeting of the committee within two weeks;

(iv) Petroleum and Power Division to jointly evaluate the shared use of gas from dedicated fields to optimize the utilisation;

(v) Petroleum Division to work the plan for restructuring of both Sui companies to get out of asset-based fixed return regime; (vi) Interior Division to work closely with E & P companies and other stakeholders to put in place best possible security mechanism to facilitate various exploration activities;

(vii) Interior Division to ensure that dedicated one-window facilitation be introduced at both federal and provincial levels to ensure security for operations in challenging areas.

Associated security costs must also be rationalised in consultation with relevant departments;

(ix) Petroleum Division to dedicatedly work on digitization of processes in Directorate General of Petroleum Concessions and come up with a detailed plan and strategy in next 45 days;

(x) Petroleum Division to streamline regulatory approvals and enhance ease of doing business, process automation and digitalization to be implemented at all levels;

(xi) Petroleum Division to complete consultations with E & P industry on proposed amendments in off-shore fiscal regime and bring the final recommendations before committee within 30 days, and further directed to pursue G2G engagement with friendly countries.

Once these improvements are approved, same shall be made part of talking points of Deputy Prime Minister for international interactions to pursue economic diplomacy;

(xii) Petroleum Division to finalize framework, in consultation with industry, for 35% of gas production by E & P companies 3rd parties. Framework to be placed before the committee;

(xiii) Ministry of Maritime Affairs and Port Qasim Authority to review and rationalize port charges, ensuring they are competitive with international standards and submit the details in next 60 days; and

(xiv) Petroleum Division to ensure RLNG diversion to domestic sector be avoided and its utilization ensured for intended purposes, which primarily include power sector.

The Committee further directed Petroleum Division to evaluate if some volumes of RLNG can be packaged with intended 3rd party sales to reduce the financial burden on public sector entities.

Copyright Business Recorder, 2024