Pakistan’s growing circular debt is putting serious pressure on oil and gas exploration companies, limiting their ability to invest in new exploration and development projects.
The financial strain has worsened due to cash flow problems caused by gas curtailments, as imported LNG continues to flood the domestic market and reduce demand for locally produced gas.
Exploration companies have repeatedly raised concerns that circular debt in the gas sector has weakened their financial position and disrupted investment plans.
Despite this, the government recently awarded 23 offshore exploration licences, mainly to state-owned companies such as OGDCL and PPL, along with blocks awarded to Mari Energies. These projects require large financial commitments, but ongoing payment delays are now casting doubt on their execution.
The country’s circular debt has reached Rs. 2.6 trillion, creating major uncertainty for investors. Mari Energies Limited has warned the government that it cannot proceed with an investment of more than $1 billion for the full-scale development of the Ghazi Ghaisakhori field under the current conditions.
The company has stressed that without assurance of sustainable gas offtake and timely payments, such a large investment is not feasible.
In a letter to the government, Mari Energies cited a recent study by Wood Mackenzie, which shows a sharp decline in gas demand, especially in the power sector.
Higher consumer tariffs, levies on captive power, and frequent gas curtailments by SNGPL have further reduced system demand.
Mari Energies also referred to discussions held in a meeting chaired by the deputy prime minister. The proposed plan involves allocating gas from the Ghazi Ghaisakhori fields to fertiliser plants.
Under this arrangement, fertiliser companies would invest over $200 million in gas processing facilities, while Mari Energies would invest around $800 million in drilling. However, the company warned that without resolving circular debt, these investments remain at risk.