Pakistan's oil and gas sector is currently facing a severe financial crisis, primarily due to skyrocketing receivables that have reached approximately PKR 800 billion (around $2.5 billion) owed to local Exploration and Production (E&P) companies. This alarming situation has been exacerbated by delayed payments from state-owned gas utilities, particularly Sui Southern Gas Company Limited (SSGCL) and Sui Northern Gas Pipelines Limited (SNGPL), which collectively owe about PKR 1.5 trillion (over $600 million) to both local and foreign firms.

The total receivables from E&P companies have surged, creating significant cash flow issues that hinder investment in exploration and production activities.

The financial strain has led to a reduction in domestic oil and gas production, with many companies cutting back on exploration activities. Only 9 out of 23 planned exploration wells were drilled as of February 2024, and operational rigs have decreased from 42 to just 19.

As domestic production declines, Pakistan is increasingly reliant on costly energy imports, particularly liquefied natural gas (LNG), which further strains the economy.

This crisis occurs against the backdrop of a larger economic turmoil in Pakistan, characterized by high inflation rates exceeding 29%, significant external debt obligations estimated at over $126 billion, and ongoing political instability. The country has struggled with rising fuel prices and a depreciating currency, which complicates its ability to import necessary energy supplies.

The Pakistan Petroleum Exploration and Production Companies Association (PPEPCA) has urged the government to take immediate action to address these financial challenges. Recommendations include providing budgetary grants to state gas companies and ensuring timely payments to foreign E&P firms to restore investor confidence and enable necessary capital flows into the sector.

Pakistan's oil sector is at a critical juncture, with soaring receivables jeopardizing its financial stability and energy security. Without urgent governmental intervention, the situation could lead to further declines in domestic production and increased reliance on expensive imports.