Exploration Companies Want Budgetary Grant of Rs. 500 Billion in FY23-24

Oil and gas exploration and production (E&P) firms have requested a tariff differential subsidy of at least Rs. 500 billion to help offset revenue shortfalls of the gas sector in the fiscal year 2023-24.

According to the Pakistan Petroleum Exploration and Production Companies Association (PPEPCA), this will greatly assist E&P companies in meeting operating expenditures as well as planned exploration and development activities for increasing indigenous gas production., reported a national daily.

Exploration companies have cut drilling activities by half due to a cash flow issue that occurred after Sui gas firms suspended payments worth Rs. 1,244 billion. Their failure to pay up has effectively rendered E&P businesses unable to fulfill contractual commitments.

According to an earlier letter from PPEPCA to the Petroleum Division, SSGC and SNGPL’s revenue shortfalls have reached Rs. 512 billion and Rs. 817 billion, respectively, stopping payments to exploration companies, who’re now receiving only 10-15 percent of dues owed, while invoices dating back up to 30 months are still pending.

The PPEPCA has requested that government officials alter the E&P Rules to allow exploration firms to pay royalties after receiving money from buyers. It also suggested revisions in the Sales Tax Act, 1990 for the sector, effectively allowing the industry to pay sales tax within one week of receiving payment of an invoice.

The Association has further asked the government to provide appropriate Policy Guidance to the Oil and Gas Regulatory Authority (OGRA) for the issuance of Consumer Gas Price Notifications as required by Section 8(4) of the OGRA Ordinance 2002, including the recovery of revenue shortfalls of the gas sector.

PPEPCA emphasized the importance of releasing Policy Guidelines to the regulator for issuance of separate consumer petrol price notifications for SSGC and SNGPL in order to satisfy the “Total Revenue Requirements” of these companies.

Lastly, the Association has sought the formation of a refund system for Sui companies. It has asked for enhanced cooperation with the Finance Ministry or central bank for timely approving forex allocations in order to disburse dollar payments to exploration companies.

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