ISLAMABAD: Prime Minister Shehbaz Sharif has constituted a high-level committee on implementation of reforms in the petroleum sector, to formulate proposals for synchronizing LNG demand for the power sector, presenting disruptive cargo diversions and addressing circular debt and tariff issues in the gas sector, official sources told Business Recorder.
The Committee comprises of Minister for Petroleum (Convener) Advisor to Prime Minister on Privatisation (co-Convener), Lt. General, Muhammad Zafar Iqbal (Member), Secretary, Power Division (Member) and Secretary Petroleum (Member).
Pakistan’s oil and gas sector circular debt is about Rs 4 trillion of which 2.866 trillion is related to gas sector.
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The Terms of Reference (ToRs) of the Committee shall be as follows: (i) work out a comprehensive proposal to synchronize LNG demand of the power sector in a manner that ensures timely and adequate supply without causing abrupt fluctuations in demand;(ii) identify causes and propose solutions to avoid sudden changes in LNG requirements by the power sector that lead to diversion of LNG cargoes to other sectors;(iii) formulate proposals to reduce circular debt in the gas sector;(iv) proposals for LNG tariff rationalization by revisiting all components of tariff (terminal changes, importer margins, LNG Service Agreement charges etc.); and (v) efficiency and transparency in tariff for domestic gas, including revenue requirement of the gas utilities, actual UFG (Unaccounted For Gas) losses taking into account growing LNG share in gas system etc.
The Committee shall submit its report within one month for the consideration of the Prime Minister.
Pakistan has diverted 5 cargoes so far as last one was scheduled for June 2025. Pakistan LNG Limited (PLL) earlier diverted four LNG cargoes due in February, March, April and May 2025 each from Italian company ENI.
Muhammad Ali, who has been conferred an additional portfolio - Advisor to Prime Minister on privatisation with status of Federal Minister /Chairman Privatisation Commission - has long been associated with the energy sector along with Lt. General, Muhammad Zafar Iqbal, National Coordinator on Power Sector. Muhammad Ali was first appointed as member of the task force on power during the Khan administration and later inducted into the interim government.
Muhammad Ali and Lt. General, Muhammad Zafar Iqbal were the key personalities of Task Force on Power, along with intelligence agencies, which negotiated with the Independent Power Producers (IPPs), Government owned Power Plants (GPPs) including Nuclear Power Plants. The government has claimed that it has saved about Rs 5 trillion over the life of projects, which otherwise were to be paid by the consumers.
However, Wind Power Projects which are about 40 are still resisting any change in their pacts citing different reasons including low dispatch. The savings from termination and revision of PPAs, has properly been made part of the consumer end tariff, except Rs 2 or Rs 2.50 per unit in QTAs.
The Task Force on Power is still intact with Minister for Power (Convener) and Muhammad Ali as co-Convener negotiating with the banks for loans of Rs 2.3 trillion to deal with the power sector circular debt – a proposal that had been submitted to the Fund late 2023 early 2024 but which was rejected by the Fund at the time.
Legal requirements with the banks are being fulfilled after which loan agreements will be signed formally, hopefully with this month, sources told this correspondent.
The Ministry of Energy (Petroleum Division) has also constituted a Working Group (WG) to formulate Circular Debt Management Plan (CDMP) of oil and gas sector, tasked to suggest a mechanism to eliminate circular debt like in the power sector. Headed by Secretary Petroleum, Secretary Petroleum, the Working Group will comprise, Managing Director, OGDCL (and one nominee from the department), Managing Director, MPCL (and one nominee from the department), Managing Director, PPL (and one nominee from the department), Managing Director, PSCOCL( and one nominee from the department), Managing Director, SNGPL (one nominee from the department), Managing Director, SSGCL (and one nominee from the department ), Director to Secretary, representative from Finance Division ( not below BS-20), representative from Power Division ( not below BS-20 and a representative from the Ministry of Planning, Development and Special Initiatives (not below BS-20).
According to the World Bank, gas sector circular debt has risen by an average Rs 68 billion per month to Rs 2.866 trillion or 2.7 per cent of GDP by end January 2024 from Rs 2.3 trillion in June 2023.
The government key reforms shared with the IMF focus on: (i) eliminating captive power by end January 2025 to ensure users transition to the electricity grid, thus channelling scare gas resources to more efficient gas-based power generators and reducing power generation costs, (ii) unification of pricing, including by further implementing the weighted-average cost of gas pricing (WACOG), (iii) introducing the automatic notification of semi-annual gas tariff determinations by the Ogra, and (iv) via further refinements to circular debt to improve monitoring and analysis, and building on current ongoing efforts.
Copyright Business Recorder, 2025
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