June 10, 2008	Tuesday	Jamadi-us-Sani 05, 1429

KARACHI, June 9: While the Sui Southern Gas Company is contemplating increasing the consumer tariff amid strong criticism of its performance, there has been phenomenal increase of 48 per cent in its legal costs, primarily due to an ill-conceived agreement it signed with some concerns.

The Oil and Gas Regulatory Authority (Ogra) has approved the utility’s demand without questioning the wisdom of the agreement the SSGC has signed with the Habibullah Coastal Power Company (HCPC).

This has been spelt out in the decisions of Ogra – dated May 20 – in the matter of the SSGC’s estimated revenue requirement for 2008-09.

The petitioner had projected legal and professional charges for the year at Rs49 million as against Rs33 million provided in 2007-08, showing an increase of 48 per cent. Historical comparison of legal and professional charges is given below:

The petitioner has attributed the sharp increase in legal expenses to the ICC arbitration in the matter of Habibullah Coastal Power Company, amounting to Rs18 million. These expenses were not envisaged earlier, the report says.

The SSGC had informed that the HCPC lodged claims for short gas supplied to it, on the ground that under the gas supply agreement, the petitioner was bound to supply a minimum of 21 MMSCF of gas per day, failing which the HCPC had the right to claim the price differential of alternative fuel.

The HCPC lodged its first claim in January 2004 against the curtailment of gas in December 2003 by the petitioner. The petitioner rejected the claim on the grounds of Force Majeure due to terrorist activities and/or extreme winter conditions.

The said gas supply agreement, negotiated by Aslam Farooq, is governed under the laws of England and arbitration is to be done under ICC rules at Singapore. The latest position is that total claim of the HCPC on account of reduced supply has risen to Rs231 million.

Ogra has not agitated in its decision the point as to why claims of Habibullah Coastal had swelled to Rs231 million and why such a flawed agreement was signed. Accepting the SSGC’s assurance that it was making efforts to resolve the dispute fairly and amicably at the earliest, Ogra, in its decision, maintained that “it would be only too fair to wait for the result of the dispute before making judgment as to the prudence of all related expenditure and apportion blame.”

In view of the above, the authority “provisionally allowed” the claimed Rs49 million on account of legal and professional charges for the year. Ironically, the SSGC acquired the services of its former controversial chief Munawar Baseer and Shaukat Channa to defend it before the international arbitration tribunal. According to insiders, over 8,000 euros were recently transferred by the company to meet their expenses in London and Singapore.

When the utility was asked by Dawn why Munawar Baseer and Mr Channa were engaged instead of Aslam Farooq, who had signed the agreement, and for what purpose such a huge amount was transferred, Nasreen Hussain of the SSGC said the company was in arbitration with Habibullah Coastal Power. The SSGC is the respondent in the case and, therefore, “as per the requirement of the ICC Tribunal, it was mandatory for the company’s representatives (Munawar Baseer Ahmad and Shaukat Channa) to attend the hearing being held in Singapore scheduled from June 2 to 6, 2008.”