Petroleum sector faces Rs 1.4 trillion circular debt, billions in uncollected levies

ISLAMABAD: The Auditor General of Pakistan (AGP) has informed the Public Accounts Committee (PAC) that the circular debt in the inter-corporate petroleum sector has surged to Rs 1,427 billion due to unresolved issues.
According to the audit report, Rs 350 billion collected under the Gas Infrastructure Development Cess (GIDC) has not been utilized for transnational pipeline projects. Additionally, Sui gas companies have failed to recover Rs 69 billion.
The report further reveals that Sui Northern Gas Pipelines Limited (SNGPL) diverted Re-gasified Liquefied Natural Gas (RLNG) to the domestic sector. Violations of winter load management policies led to losses of up to Rs 53 billion, while delays in the installation of compression equipment at gas fields resulted in a Rs 44 billion loss.
The AGP noted that the Oil and Gas Development Company Limited (OGDCL) failed to reduce expenses in unprofitable fields, which led to a Rs 32.6 billion drop in profits. Furthermore, Rs 28 billion in royalties remain uncollected from nine exploration and production companies.
According to the audit, OGDCL awarded contracts worth Rs 15.28 billion to inexperienced bidders due to poor standards in evaluating technical bids. Meanwhile, the Petroleum Division failed to collect Rs 14.63 billion in petroleum levies from refineries—an amount that had already been passed on to consumers.
The audit also highlights an unnecessary investment of Rs 10.45 billion in an additional pipeline project. Delays in the construction of gas collection pipelines increased costs by Rs 9 billion, and gas development schemes worth Rs 7.49 billion were not completed on time.
Despite the installation of submersible pumps, there was no increase in oil production. The failure to boost output caused estimated losses of Rs 2.3 billion.
Moreover, the AGP reported that PSO and Sui Northern failed to deposit Rs 1.5 billion in dividends, and OGDCL did not recover Rs 847 million from its joint venture partners.
The Auditor General has recommended that the Petroleum Division take immediate action to resolve the circular debt crisis. It also advised that pipeline project delays be addressed at appropriate forums and urged OGDCL to identify and address gaps that are hindering key projects.