E&P companies express concern over default by Sui companies in payment

ISLAMABAD: Pakistan’s upstream oil and gas sector has raised serious concerns over a sharp increase in unpaid dues, warning that mounting receivables from gas utility companies are threatening the financial viability of exploration and production (E&P) firms and undermining energy security.
In a letter addressed to the Secretary Petroleum, the Pakistan Petroleum Exploration and Production Companies Association (PPEPCA) highlighted that receivables owed by Sui Southern Gas Company Limited (SSGCL) and Sui Northern Gas Pipelines Limited (SNGPL) have surged by approximately Rs40 billion in recent months, reversing earlier gains made in reducing outstanding payments.
The association noted that despite operating under challenging economic conditions, E&P companies had continued to support the country’s energy needs, particularly during disruptions in imported liquefied natural gas (LNG) supplies. Between March and May 2026, the sector contributed an additional 153 million standard cubic feet equivalent per day (MMscfed), helping to ease the energy shortfall.
However, the industry warned that such contributions may not be sustainable if the issue of delayed payments is not addressed on an urgent basis.
Decade-Long Build-Up of Receivables
According to the data shared by PPEPCA, receivables have been steadily accumulating over the past decade, placing increasing financial strain on upstream companies. The association described the situation as a “persistent structural challenge” that has constrained liquidity and limited the sector’s ability to reinvest in exploration and production activities.
As of March 31, 2026, the total receivables from the two gas utility companies stood at staggering levels. SSGCL alone owed over Rs748 billion in local currency invoices and an additional $341 million in foreign currency obligations. Meanwhile, SNGPL’s outstanding dues amounted to approximately Rs739 billion along with nearly $6 million in dollar-denominated payments.
In total, the combined receivables exceed Rs1.48 trillion, excluding late payment surcharges, reflecting the severity of the issue.
Industry officials say these figures underline a systemic problem in the gas supply chain, where payment delays cascade across the sector, ultimately affecting upstream producers who bear the brunt of financial stress.
Violation of Contractual Terms
The PPEPCA pointed out that under the Petroleum Concession Agreements (PCAs) and Gas Sale Agreements (GSAs), gas buyers are contractually obligated to settle invoices within 30 days. However, the current aging profile of receivables indicates widespread non-compliance with these terms.
“The growing backlog of overdue payments reflects a serious breach of contractual obligations and highlights inefficiencies in the financial management of the gas utilities,” an industry source said.
Delayed payments not only erode the cash flow of E&P companies but also increase borrowing costs, reduce profitability, and deter investment in new exploration projects. Stakeholders warn that if the trend continues, it could lead to a slowdown in domestic gas production, further exacerbating Pakistan’s energy challenges.
Impact on Energy Security
The letter emphasizes that the E&P sector has played a critical role in maintaining energy supply, especially during periods of external shocks such as LNG supply disruptions. However, continued financial stress could limit the sector’s ability to sustain production levels or undertake new developments.
“Without timely payments, the industry’s capacity to invest in exploration and enhance production will be severely compromised,” the association cautioned.
Pakistan has long struggled with declining gas reserves and increasing reliance on imported energy. In this context, the domestic E&P sector is seen as a vital pillar for ensuring energy security and reducing the import bill.
Experts argue that resolving the receivables issue is essential not only for the survival of upstream companies but also for the broader stability of the energy sector.
Call for Structural Reforms
PPEPCA has urged the government to take immediate and concrete steps to address the problem of overdue receivables. The association called for both financial and structural measures to improve the liquidity position of gas utility companies and ensure timely payments to E&P firms.
Among the proposed solutions are reforms in tariff structures, improved recovery mechanisms, and enhanced financial discipline within state-owned utilities.
The association also stressed the need for a coordinated approach involving key stakeholders, including the Ministry of Energy, the Oil and Gas Regulatory Authority (OGRA), and the Directorate General of Petroleum Concessions.
Copies of the letter were sent to senior government officials, including the Federal Minister for Energy (Petroleum Division), the Chairman of OGRA, and top executives of SSGCL and SNGPL, signaling the urgency and importance of the issue.
Industry Seeks Government Support
The E&P sector has appealed for the government’s support in resolving what it described as a “long-standing issue” that continues to have a crippling effect on the industry.
“We would greatly appreciate your kind support in resolving this issue of overdue receivables,” the association stated, emphasizing that timely intervention is critical to restoring confidence in the sector.
Industry stakeholders believe that addressing the receivables crisis could unlock significant potential for increased domestic production, job creation, and economic growth.