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Massive reduction in receivable helps in controlling financial charges, though marginally

By SHABBIR H. KAZMI
Feb 07 - 13, 2000

Two features marked the performance of Pakistan Petroleum Limited (PPL) for the year ending June 30, 1999. There was an increase in the volume of gas sold and more than 50 per cent decrease in trade debt as compared to the previous year. The contraction in receivable was mainly due to reduction in amount payable by WAPDA and full settlement of outstanding dues by Sui Southern Gas Company (SSGC).

The operations of the Sui gas field continued satisfactorily throughout the year. The volume of gas sales during the year was 227,479 million cubic feet as compared to 233,697 million cubic feet in 1997-98. Sales volumes were higher due to increase in the gas demand by the customers. The volume of gas sales from Kandhkot gas field declined slightly due to lower gas demand by WAPDA. The total volume of gas sold from Adhi field was more or less at the level of the previous year. Phase-I gas processing facilities also operated satisfactorily though there was a decline in volume. This reduction was due to variation in the demand by Sui Northern Gas Pipelines and annual maintenance of the processing plant.

While there was reduction in sales in rupee terms, the reduction in profit before tax was due to increase in field prospecting and development expenditure. The expenditure under this head increased from Rs 2.78 billion in 1997-98 to Rs 3.249 billion during the year under review. The other reason for the decline in profit before tax was a decline in income under other heads. The profit after tax for the year was Rs 393 million. Out of this amount Rs 167.5 million was distributed as dividend among the shareholders of ordinary and convertible preference shares.

Another important point to be noted is that the Price Determining Authority (PDA), Ministry of Petroleum & Natural Resources has notified the revised gas price for SSGC, SNGPL and WAPDA for the year ended June 30, 1999. Consequently amounts of Rs 302.672 million and Rs 90.736 million are refundable by PPL to SNGPL and SSGC respectively for the year ending June 30, 1999. This amount will be adjusted against future sales to these companies.

The PDA has also directed PPL not to take any credit for the interest income receivable from WAPDA under the gas sales/purchase agreement between the Company and WAPDA on account of delays and overdue payments of Company's gas sales bills for supply of gas. PPL was also advised not to make any provisions in the accounts for the interest payable to the GoP on account of late deposit of gas development surcharge which has resulted from delayed and overdue payments by WAPDA.

Yet another important feature was the increase in the amount due to the President. This amount increased from Rs 145 million for the previous year to Rs 393 million for the year 1998-99. The shares owned by the GoP in the Company are in the name of President of Pakistan. The amount is adjustable under the provisions of the Sui Gas Well-head Price agreement.

The year 2000 also marks the 50 years of successful operations of PPL. The Company was incorporated on June 5, 1950. The Company has grown with the country and it is a story of commitment. PPL has been a stable source of abundant energy for a developing society that moved steadily towards industrialization. The next fifty years will be marked with a preparedness and confidence that comes from its uncompromising professionalism, and from the vision that seeks to ensure that the vital search for oil and gas.

A total of 87 wells, including a deep well drilled recently, have been drilled and completed in the Sui field. The gas production from this field averaged 836 MMcfd during 1998-99 as compared to 704 MMcfd in the previous year. The maximum daily production from the field during the year was 954 MMcfd in February 1999.

PPL's share of production of natural gas from the various fields and production of LPG and natural gas liquids in terms of energy was equivalent to about 162,847 barrels of crude oil per day. This resulted in considerable savings in foreign exchange for the country during the year.

Record of Drilling Operations

Number of wells drilled 169

Exploration/Appraisal wells 52

Development wells 117