PSO is interested in the shares of OGDCL, Mari Petroleum

Islamabad:

Pakistan State Oil (PSO), grappling with serious financial challenges, is exploring a strategic route to acquire stakes in state-owned oil and gas exploration and power companies. The move is aimed at addressing the pressing issue of the company’s mounting revolving debt, which threatens to push it into bankruptcy.

The Economic Coordination Commission (ECC) recently approved government guarantees of Rs 100 billion to shore up PSO’s financial position, signaling the seriousness of the situation. The company is currently saddled with receivables in excess of Rs 700 billion, significantly hampering its ability to sustain operations.

Sources revealed to The Express Tribune that PSO is keen to acquire stakes in two major oil and gas exploration companies namely Oil and Gas Development Company Limited (OGDCL) and Mari Petroleum as part of its strategy to settle the looming circular debt. Additionally, efforts are underway to transfer the Nandipur power plant to PSO and the company is looking at acquiring Gujranwala Electric Power Company (Gecpo) to create a footprint in the power sector.

“The acquisition of power companies will be another important step in expanding PSO’s presence in the power sector,” according to informed sources. PSO had previously established PSO Renewable Energy (Pvt.) Limited, focused on the development and execution of renewable energy projects in line with the government’s renewable energy policy.

While traditionally limited to trading petroleum products, PSO diversified into the LNG business in 2015 through a long-term supply contract with Qatar on a government-to-government basis. This strategic move widened PSO’s business scope but also led to the creation of circular debt due to the absence of a legal framework for natural gas utilities to supply expensive LNG to domestic consumers.

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Currently, PSO is expecting over Rs 450 billion from Sui Northern Gas Pipeline Limited (SNGPL) for LNG supply, but it is yet to be resolved due to lack of mechanism to recover LNG cost from domestic consumers. Despite the caretaker government’s recent gas price hike of up to 139%, PSO’s financial woes continue, prompting the approval of government guarantees to borrow Rs 100 billion from banks.

Besides SNGPL, power companies are major defaulters, owing over Rs 180 billion to PSO. Notable among them are Gencos with debt of over Rs 150 billion, Hubco with Rs 28 billion and Kapco with Rs 5 billion. These companies, chronic defaulters, have not paid PSOs for fuel supplies for power generation.

Pakistan International Airlines (PIA) is also a major defaulter, owing Rs 26 billion to PSO for fuel supply to run the national carrier’s operations. PSO, which also procures fuel from local oil refineries, faces over Rs 60 billion dues to these refineries.

To compound the financial challenges, PSO imports RLNG from Qatar and oil from Kuwait Petroleum Corporation, demanding over Rs 230 billion to clear dues for these LNG and oil supplies, including payments for letters of credit (LC). .

Published in The Express Tribune, November 12^u2023.

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