ISLAMABAD: The Ministry of Finance has raised concerns over the poor financial management in Pakistan’s oil and gas sector, attributing it to the rising circular debt and operational inefficiencies.
In its report, the ministry identified key weaknesses in the business strategies of major state-owned enterprises (SOEs), including Pakistan State Oil (PSO), Pakistan Petroleum Limited (PPL), Oil and Gas Development Company (OGDC), Sui Northern Gas Pipelines Limited (SNGPL), and Sui Southern Gas Company Limited (SSGCL). Ineffective financial practices and delays in payments from other SOEs and customers have resulted in significant cash flow constraints and liquidity challenges.
For instance, PSO remains entangled in the circular debt cycle, struggling to meet its working capital needs and invest in growth initiatives. Similarly, SNGPL and SSGCL face substantial collection issues, weakening their financial stability and increasing reliance on government bailouts.
The report also criticized the outdated infrastructure of these companies. OGDC and PPL, as upstream leaders, operate on ageing extraction and production equipment, leading to higher costs and reduced productivity. Meanwhile, SNGPL and SSGCL suffer from high unaccounted-for gas (UFG) losses due to pipeline leakages, obsolete infrastructure, and inadequate metering systems. Despite the awareness of these issues, there has been insufficient allocation of resources toward modernizing critical infrastructure, further exacerbating revenue losses and operational inefficiencies.
Another pressing issue is the lack of diversification in energy investments. PSO, PPL, and OGDC remain heavily reliant on fossil fuels, with minimal progress toward integrating renewable energy solutions. This reliance leaves them vulnerable to fluctuating oil and gas prices, declining global demand for fossil fuels, and stricter environmental regulations. PSO, for example, continues to focus predominantly on the downstream oil sector with limited ventures into cleaner energy alternatives.
The ministry also highlighted insufficient risk management strategies across the sector. PPL, OGDC, and PSO have failed to prioritize financial instruments like futures, swaps, or options to shield against price volatility. Additionally, SNGPL and SSGCL lack robust mechanisms to mitigate risks from fluctuating gas supply costs and infrastructure disruptions. Without proactive measures, these companies remain exposed to external shocks in the market and supply chain.
The Ministry of Finance has urged immediate reforms in financial planning, infrastructure upgrades, and energy diversification to address these systemic challenges and strengthen the sector’s resilience against future economic and environmental uncertainties.
