Pakistan’s deepening circular debt crisis is once again emerging as a critical barrier to investment in the country’s energy sector. In a significant warning for policymakers and investors alike, Mari Energies Limited has revealed that it is unable to move forward with over $1 billion in planned investment for the full development of the Ghazi Ghisakhori gas field, citing persistent cash flow constraints caused by unpaid dues and systemic inefficiencies in the gas sector.
The development highlights how unresolved circular debt is not only weakening existing energy infrastructure but also choking future exploration, offshore drilling, and long-term energy security.
Circular Debt and Its Growing Impact on Pakistan’s Gas Sector
According to Mari Energies, the circular debt crisis currently estimated at PKR 2.6 trillion has created an environment where even financially strong exploration and production (E&P) companies are struggling to commit fresh capital.
The company has formally conveyed to the government that without guaranteed gas offtake and timely payments, it cannot justify billion-dollar investments in large-scale gas field development.
This crisis is not limited to Mari Energies alone. Major state-owned and private sector companies, including OGDCL and Pakistan Petroleum Limited (PPL), are facing similar challenges as receivables pile up across the gas value chain.
Why the Ghazi Ghisakhori Gas Field Matters
The Ghazi Ghisakhori gas field is considered a strategically important domestic energy asset. Its full development could:
- Reduce Pakistan’s reliance on expensive LNG imports
- Improve gas availability for key industries
- Support fertilizer production and agricultural output
- Strengthen energy security amid foreign exchange shortages
However, Mari Energies has clarified that unlocking the field’s full potential requires more than $1 billion in cumulative investment, including offshore drilling, infrastructure expansion, and long-term production facilities.
Cash Flow Pressures from LNG Imports and Limited Gas Demand
Mari Energies has pointed out that increased LNG imports, coupled with restricted domestic gas offtake, have worsened cash flow pressures for upstream producers.
Key issues include:
- Priority allocation of gas to LNG contracts
- Reduced gas demand, especially from the power sector
- Delayed payments from distribution companies
- Rising tariffs and levies passed on to end consumers
A study cited by the company, conducted by Wood Mackenzie, indicates that gas demand particularly from the electricity sector has declined sharply, further weakening the revenue outlook for gas producers.
Additionally, persistent supply-demand mismatches at Sui Northern Gas Pipelines Limited (SNGPL) have added operational uncertainty.
$1 Billion Investment at Risk Without Policy Assurance
In its communication to the government, Mari Energies stressed that investment cannot proceed in the absence of firm guarantees regarding:
- Continuous gas offtake
- Timely and full payments
- Stable regulatory and pricing frameworks
The company warned that continued uncertainty could derail offshore drilling plans and discourage not just local but also foreign investment in Pakistan’s upstream energy sector.
The FMPAC Proposal: A Possible Way Forward
To address the crisis, Mari Energies has urged the government to support a proposal submitted by the Fertilizer Manufacturing Policy Advisory Committee (FMPAC).
Under this proposal:
- Gas from the Ghazi Ghisakhori field would be allocated primarily to fertilizer plants
- A structured backfill gas supply mechanism would be implemented
- Mari Energies would invest approximately $800 million
- The fertilizer industry would contribute an additional $200 million
This integrated approach aims to ensure stable demand, predictable cash flows, and long-term viability for both energy and agriculture sectors.
High Stakes for Pakistan’s Energy and Economic Stability
Mari Energies has cautioned that withdrawing or delaying this proposal would place the entire $1 billion investment at serious risk. Such an outcome would send a negative signal to investors and further undermine confidence in Pakistan’s ability to resolve structural issues in its energy sector.
The situation underscores a broader reality: without resolving circular debt, Pakistan will struggle to:
- Attract large-scale energy investments
- Reduce LNG import dependence
- Stabilize gas prices
- Support industrial and agricultural growth
Circular Debt Is Now a National Investment Bottleneck
The warning from Mari Energies serves as a stark reminder that circular debt is no longer just an accounting issue, it is a national investment bottleneck.
If Pakistan aims to secure its energy future, stabilize the economy, and reduce external vulnerabilities, decisive action on circular debt reform is unavoidable. Clearing payment backlogs, restoring investor confidence, and aligning energy policy with market realities will determine whether billion-dollar opportunities move forward or quietly disappear.
