Oil exploration and production companies have signaled an imminent closure of operations amid nonpayment of roughly Rs. 1.3 trillion or $4.65 billion in pending dues from Sui firms.
The Pakistan Petroleum Exploration and Production Companies’ Association (PPEPCA) said in a letter to senior government officials and other stakeholders that their receivables have continued to grow and the payments they received were not even enough to cover taxes they pay to the government.
“The payment made by Sui companies is not even sufficient to cover payment of 18 percent sales tax and 12.5pc royalty and advance income tax and as a result, nothing is available to fund the operating, development and exploration expenditures,” the PPEPCA stated.
The Association complained that companies have no other choice but to borrow at outrageous rates of 25-30 percent to continue production operations, and most planned exploration and development drilling activities have been put on hold.
The suspension of the aforesaid activities at this time would badly impact the local energy and transportation industries. It bears mentioning that Pakistan’s petroleum imports slumped by over 55 percent year-on-year in June and the resultant shortage of fuel coupled with suspended exploration/production activities may negatively offset national consumption forecasts for upcoming cycles.
Pakistan requires an adequate stock of multi-grade distillates to maintain production for different purposes and avoid any supply chain challenges in the short term.
Source: Pro Pakistani