OGDCL facing severe liquidity crunch

ISLAMABAD: The monster of circular debt has been negatively impacting whole energy sector as Managing Director of OGDCL on Monday revealed that this public sector entity was facing severe liquidity crunch in the wake of stuck up debt to the tune of Rs250 billion against the power sector.

“Our stuck up debt in power sector has gone up to Rs250 billion as outstanding liabilities against two major gas utilities stand at Rs95 billion and Rs50 billion against Sui Southern Gas Company and Sui Northern Gas Company respectively as well as over Rs100 billion against Power Holding Company,” MD OGDCL Zahid Mir said while addressing Pak Oil and Gas Igniting Growth arranged by Byco and Jang Group here on Monday.

Prime Minister’s Special Assistant on Power Shahzad Qasim said on the occasion that the government decided to borrow through Islamic Sukuk for removing the liquidity crunch of the power sector as it would grant breathing space to undertake crucial reforms.

Now the power sector losses, he said, would be brought down from 30 percent to 15 percent in order to avoid piling up of circular debt again. He said the circular debt was the outcome among the mismatch between generation cost and recovered cost per unit. Now the government decided to pick up certain portion of liabilities through power sector subsidy while remaining would be filled through bringing down theft and line losses.

He said the power supply was no more the main issues as the load management would continue in coming months but the provision of power at affordable rates had become the major issue in the country.

Chairman All Pakistan Textile Mills Association Adil Bashir said that the fuel cost per unit stood at Rs6 but the commercial rate of power charged at Rs24 per unit so there was need to analyse its reasons and it must be brought down with regional prices. He said the government reduced prices of electricity and gas for export oriented industries including textile. He said the gas prices were much higher in Punjab compared to Sindh and KP and there was need to bring uniform tariff for whole country.

The leader of All Pakistan CNG Association Ghayas Paracha demanded of the government to allow the private sector for importing RLNG in order to reduce its cost as monopoly of public sector was causing increased prices of average gas availability in the country.

Earlier, in the session, MD OGDCL said that offshore exploration possessed possibility of 15 percent success but it was estimated to have potential of 8 to 10 trillion cubic feet (TCF). “It possesses huge risk and huge reward as well as we are going to invest $80 million but if it becomes successful it can become game changer for Pakistan,” he added.

In last ten year, the average discovery size decreased to 50 bcf. Mr Moeen said that total 387 discoveries were made as total drilled wells stood at 1070. They said the security had become major ticket item for the companies and cited example that they spent $34 million in exploration in Balochistan and the security incurred cost of $24 million.

He said that Iraq was providing security police to companies undertaking exploration of oil and gas and Pakistani government should move ahead to ensure security for boosting exploration activities in all areas of the country.