ISLAMABAD:
As LNG supplies from Qatar continue, Khyber-Pakhtunkhwa (K-P) has raised serious concerns over the forced cutback in domestic oil and gas production. This reduction has led to a substantial revenue loss for the province in terms of royalties and windfall levies.
Local exploration and production companies normally pay these royalties and levies alongside other taxes. However, with the forced curtailment of production from fields operated by firms like OGDCL and MOL, these payments have significantly decreased.
The issue has also alarmed the exploration companies, which have approached Prime Minister Shehbaz Sharif for intervention. The special assistant to the K-P chief minister on energy and power has also raised the matter with the federal government.
During a recent meeting, he emphasized that the forced reduction in gas production from fields in K-P has not only hurt output and potentially damaged the reservoirs but has also deprived the province of much-needed revenue. He urged the federal government to establish a mechanism to prevent such forced cutbacks in the future for the benefit of both provincial and federal stakeholders.
Both the federal and K-P governments acknowledged the severity of the issue, agreeing to resolve it through consultations with all concerned parties.
The forced cutbacks have added to the sector’s woes, including the growing circular debt problem. Importing costly LNG from Qatar has only worsened Pakistan’s import bill, while power producers have been reluctant to honor their LNG purchase commitments, leaving Pakistan State Oil (PSO) – a major LNG importer – in a challenging position.
Meanwhile, due to the decline in local oil and gas production, Attock Refinery Limited (ARL) has shut down its main crude distillation unit until June 1, 2025. This development highlights the urgency of the situation, as it will negatively impact not only ARL but also major exploration firms like OGDCL.
Industry sources attribute the crisis to the previous PML-N government’s decision to sign an LNG deal with Qatar without fully evaluating Pakistan’s gas demand. This hasty agreement has severely hurt the energy sector and led to mounting circular debt.
Efforts by the private sector to import LNG have been hampered by bureaucratic and political hurdles, with global LNG prices now too high to make imports feasible. Although Pakistan has two LNG terminals, one is operating below capacity due to mismanagement of the LNG issue.
In a notification to the Pakistan Stock Exchange (PSX), ARL confirmed it had closed its main crude distillation unit (with a capacity of 32,400 barrels per day) because of very low crude stocks. It added that Sui Northern Gas Pipelines Limited (SNGPL) was facing high system pressure, forcing the reduction in local gas production and impacting oil and gas supplies.
