Oil & gas sector sees circular debt resolution crucial for $5bn investment

KARACHI: The oil and gas exploration sector in Pakistan has linked a $5 billion investment over the next three years to the resolution of circular debt issues and timely repatriation of profits to foreign partners, The News learnt on Thursday.

According to recent statements from the PM Office, companies within the oil and gas exploration sector have committed to investing $5 billion in the exploration and production (E&P) sector.

Clarifying the nature of this investment, industry insiders explained that it “is not foreign investment” and that it primarily pertains to routine E&P operations scheduled over the coming years.

“Drilling wells for oil and gas exploration is part of our ongoing and future work,” said a senior executive from a company in his comments to The News, speaking anonymously. He pointed out that “we informed in the meeting chaired by the prime minister that this investment would be executed only if the circular debt issue -- amounting to Rs1,500 billion -- is resolved, and repatriation of profits -- $650 million -- is made possible sooner.”

While the government has formed a committee to formulate policies facilitating this investment plan -- spanning long-term, medium-term, and short-term measures -- the feasibility of these policies remains contingent upon resolving circular debt issues and facilitating profit repatriation to foreign partners, he added/

He added that E&P firms have presented consolidated figures to the government, detailing the drilling of 240 wells over the next three years, with an estimated financial outlay of $5 billion. The schedule includes plans to drill 71 wells in the current year, followed by 82 in 2025 and 85 in 2026.

Despite the government’s announcement of support for the sector, E&P companies have also raised concerns regarding the deteriorating ease of doing business in Pakistan. Issues cited include inconsistent government policies and security challenges, particularly in regions targeted for oil and gas exploration.

Highlighting the importance of local oil and gas production, the official stressed its role in conserving foreign exchange reserves and combating gas theft. “If we calculate the theft of gas in the country in the last five years, it equals to the loss of 22 cargoes of imported gas,” he pointed out.