Govt Tells Gas Companies to Secure Bank Financing For LNG Imports

The government has instructed Sui Northern Gas Company Limited (SNGPL) and Sui Southern Gas Company (SSGC) to secure necessary financing through banks for importing Liquefied Natural Gas (LNG). This will help Pakistan State Oil (PSO) open and settle Letters of Credit (LCs), reported TheNews. Under the LNG agreement with Qatar, PSO is the designated entity responsible for importing LNG and settling payments. Consequently, the gas companies have been directed to acquire loans over a three-month period to facilitate smooth LNG imports. PSO is currently burdened with a total borrowing of Rs. 461 billion and financing costs exceeding Rs. 7 billion. The projected finance costs for PSO are expected to surge to Rs. 64 billion in FY24. Notably, while gas companies have started recovering Regasified Liquefied Natural Gas (RLNG) prices from domestic consumers under the WACOG mechanism, they have failed to reimburse PSO for the RLNG costs. The latest financial position indicates that PSO’s liquidity has crashed to a critical level of Rs. 852 billion. SNGPL and many power sector entities are some of its biggest defaulters. An amount of Rs. 50 billion has been arranged for PSO to address the liquidity crunch in March. Gas companies take 50-60 days to recover bills from consumers, whereas PSO must settle LNG cargo payments within 10 days of offloading. Given these challenges, the government has instructed gas companies to secure liquidity from commercial banks to help alleviate PSO’s liquidity issues.