PSO fears inability to maintain LNG supplies to Sui Northern

Islamabad

The Pakistan State Oil (PSO), after issuing warning to Pakistan International Airlines (PIA) for clearance of over Rs15 billion dues for future jet fuel supply, has also come down heavily on Sui Northern Gas Pipelines Limited (SNGPL) for not paying mammoth amount of Rs10.151 billion against the supplies of re-gasified liquefied natural gas (RLNG).

Soaked in circular debt of Rs251 billion as of October 19, 2016, the PSO fears that non-payment by Sui Northern will make the state-owned oil marketing company unable to honour its payment commitments to LNG suppliers on time which will seriously affect the supply chain of LNG and the creditability painstakingly built, reveals an official letter of PSO’s managing director to the top man of Sui Northern of which a copy is also exclusively available with The News.

The letter with its subject on ‘outstanding dues of PSO against sale of RLNG to Sui Northern’ signed by Sheikh Imranul Haque, to Amjad Latif, Managing Director Sui Northern says, “PSO is facing severe liquidity crisis due to soaring LNG receivables and is finding it extremely difficult to honour its payment commitments to LNG supplier which will seriously affect the LNG supply chain. And more importantly, the credibility that PSO has built will get spoiled.”

When contacted, one of SNGPL’s top officials said on the condition of anonymity that Sui Northern has paid Rs1 billion to PSO arguing that power sector is not paying to the gas company after using RLNG for power generation.

However, the letter also mentions that PSO has incurred significant financial cost on payment to suppliers owing to the fact that Sui Northern has not been making payments to PSO against LNG supplies in line with its cash collection cycle. The state-owned oil marketing company has borne financial cost of Rs833.76 million on this account. If the state of affairs with Sui Northern will continue, then it will not be able to provide RLNG to it which will adversely dent the power generation and industrial activities in Punjab. The gloomy picture of the financial matters can be seen through the fact that that PSO has also paid to the banks the hefty amount of Rs7.15 billion just as financial charges in financial year 2016 against the loans borrowed to keep supply chain of various petroleum products intact only because various entities are not ready to pay the lofty dues of PSO.

The communication to Sui Northern also highlights the fact that significant RLNG supplies are being made to CNG, fertiliser and industrial sectors through Sui Northern wherein the payment cycle is very short and in some cases SNGPL gets hold of some advance payments. But unfortunately when it comes to making payments to PSO, the Sui Northern starts squeezing the financial supply owing to which payments to PSO have drastically tumbled, resulting in the escalation of outstanding dues up to Rs10.151 billion.