Oil and Gas Development Company Limited (OGDCL), Pakistan’s largest upstream oil and gas exploration and production company, has received its seventh consecutive monthly interest payment from Power Holding (Private) Limited under the federal government’s Circular Debt Settlement Plan, marking continued progress in addressing long-standing liquidity challenges in the energy sector.
According to a formal disclosure submitted to both the Pakistan Stock Exchange and the London Stock Exchange in compliance with the Securities Act, 2015, the latest installment amounts to Rs7.725 billion. This payment is part of a structured government-approved mechanism designed to clear accumulated interest liabilities related to Term Finance Certificates issued in previous years.
The current settlement plan covers a total interest obligation of Rs92 billion, which is being repaid through 12 equal monthly installments. The repayment schedule commenced in July 2025 and is expected to be completed by mid-2026, provided payments continue as planned. With the receipt of the seventh installment, OGDCL has now recovered approximately Rs54 billion in interest under this arrangement.
The interest payments are linked to a broader effort by the government to stabilize Pakistan’s energy value chain, which has been under stress for years due to circular debt. Circular debt refers to the buildup of unpaid obligations within the power sector, where delayed payments by consumers, distribution companies, and generation entities cascade upstream, affecting fuel suppliers and exploration firms such as OGDCL.
Earlier, in June 2024, the federal government had cleared Rs82 billion in principal dues owed to OGDCL as part of the same reform initiative. That settlement addressed outstanding receivables that had accumulated over time and constrained the company’s cash flows, limiting its ability to reinvest in exploration, production, and field development activities.
Industry analysts note that consistent monthly interest payments signal improved fiscal discipline and a stronger commitment by the government to resolve structural issues in the energy sector. For upstream companies, predictable cash inflows are critical not only for maintaining existing production but also for funding new exploration projects, enhancing recovery rates, and reducing reliance on external borrowing.
OGDCL stated that the steady flow of payments has positively impacted its liquidity position, allowing it to better manage operational expenses and support ongoing exploration and production initiatives across its portfolio. Improved cash flow also strengthens the company’s balance sheet at a time when the energy sector is undergoing gradual restructuring and policy reform.
The circular debt problem has historically weighed on investor confidence in Pakistan’s energy sector, creating uncertainty for both local and foreign stakeholders. However, structured repayment plans, coupled with broader reforms in tariffs, governance, and market operations, are increasingly being viewed as steps toward restoring financial sustainability.
While challenges remain, the continuation of payments under the Circular Debt Settlement Plan suggests incremental progress in resolving one of Pakistan’s most persistent economic bottlenecks. For OGDCL, the recovery of interest income not only improves near-term financial stability but also supports longer-term investment planning in a capital-intensive industry that plays a critical role in national energy security.
As repayments continue through 2026, market participants will closely monitor consistency and adherence to the agreed schedule, viewing it as a key indicator of the government’s ability to follow through on broader energy sector reforms and fiscal commitments.
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