The Economic Coordination Committee (ECC) has approved the extension of sovereign guarantees worth Rs50 billion for Sui Northern Gas Pipelines Limited (SNGPL), providing critical support to help the company manage its liquefied natural gas (LNG) payment obligations.
The decision was taken after the Petroleum Division briefed the ECC that SNGPL’s financial position has improved significantly, and the company now holds sufficient stock and cash flow to begin retiring the debt. However, SNGPL is still struggling with liquidity issues, primarily due to circular debt, subsidies, and diversion of RLNG to domestic sectors.
Background on Sovereign Guarantees
The ECC originally approved the sovereign guarantee facility on March 14, 2023, which was executed by the Finance Division on July 4, 2023. Under this arrangement:
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Allied Bank Limited (ABL) received Rs20 billion,
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Faysal Bank Limited (FBL) received Rs20 billion,
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National Bank of Pakistan (NBP) received Rs10 billion.
These guarantees were issued to cover RLNG payments to Pakistan State Oil (PSO) and Pakistan LNG Limited, with a tenure of one year, expiring on April 12, 2024.
Request for Extension
Faced with a tight liquidity situation and pending repayments, SNGPL requested a one-year extension in the validity of the guarantees. It proposed converting the short-term running finance facility into a long-term loan spanning 5 to 10 years, to allow a smoother repayment structure.
The Finance Division acknowledged the request, classifying the extension as a new financing facility, and stressed the need to adhere to sovereign guarantee guidelines dated February 3, 2020. It also required SNGPL to present a comprehensive cash flow plan for FY 2024-25.
ECC’s Decision
The ECC, after reviewing the summary titled “Extension in Validity Period of Sovereign Guarantees issued against Running Finance/Musharakah Facility of Rs50 billion obtained from Allied Bank Limited, Faysal Bank Limited and National Bank of Pakistan for RLNG Payments”, approved the extension:
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New Validity Period: Up to June 2026
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Condition: Treated as a new facility, subject to full compliance with existing sovereign guarantee regulations
This decision is seen as a critical move to ensure uninterrupted LNG supplies, maintain market confidence, and allow SNGPL time to manage its debt servicing and financial recovery.
