Govt asks SSGC, SNGPL to arrange financing for LNG imports

ISLAMABAD: To ensure a smooth supply of LNG, the government has asked Sui Northern Gas Company Limited (SNGPL) and Sui Southern Gas Company (SSGC) to arrange the required financing through banks to enable PSO open and retire LCs, a senior official of the Energy Ministry told The News.

“PSO has already been exposed to Rs461 billion as a whole in borrowing and its financing cost has exceeded Rs7 billion. The situation is no longer sustainable and PSO cannot finance SNGPL for LNG as the company’s finance cost is expected to rise from Rs3.6 billion in FY22 to a staggering figure of Rs64 billion in FY24. Interestingly, the gas companies have started recovering RLNG price from domestic consumers under weighted average cost of gas (WACOG) mode but are not paying the cost of RLNG to PSO,” said the Energy Ministry official.

Under the LNG agreement with Qatar, PSO is the nominated entity of the government that will import LNG and pay back for the product. Now for three months, the gas companies have been asked to borrow loans to pay PSO for smooth LNG imports and if the billing cycle of both the gas companies improves after the gas price hike and enforcement of limited WACOG, it would also help them to pay PSO.

As per the latest payable and receivable position, the PSO’s liquidity position has worsened to an unbearable level of Rs852 billion with a massive default from SNGPL amounting to Rs571 billion. The power sector is the second biggest defaulter that owes PSO Rs187 billion.

“We have arranged Rs50 billion for PSO and another amount will be arranged for March to improve the liquidity crisis. To this effect, Sui Northern will arrange a loan to pay PSO,” the official of the Energy Ministry said.

“Last year in January, PSO borrowed Rs100 billion to ensure LPG supplies in Pakistan on account of the failure of both the gas companies to pay it on time.

Now PSO has reached the verge of default and it cannot borrow for the gas companies that use RLNG but fail to pay back to PSO,” said the official.

The official said that the entire process of gas companies for recovering bills from consumers takes 50-60 days. However, PSO has to pay for LNG cargo in 10 days after its offloading, which makes the situation difficult for the company.

Given the situation, the government has asked the gas companies to arrange liquidity from commercial banks.