ISLAMABAD: The petroleum ministry has conceded, rather reluctantly, that there have been serious irregularities in some projects related to gas production, construction of buildings and training of professionals.

The fund, under the rules, is reserved for training, research and acquisition of expertise for professionals of DGPC, which deals with exploration and development of oil and gas in the country. The rules were relaxed, empowering the petroleum secretary to use this fund for training of other officials of the oil and gas sector.

A senior official, however, said the petroleum secretary as the principal accounting officer had approved and authorised the payment of charges for litigation and international arbitration out of the training fund.

Documents suggest that petroleum secretary approved payment of 3.4m pounds sterling to the UK-based law firm, Allen & Overy, followed by $1.62m to BRG of the UK and the court of arbitration as legal fee. Another Rs7.8m was paid to Advocate Mian Gul Hassan. All the money was paid out of the training fund.

Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi acknowledged that the training fund could not be used for other purposes, but said he was not aware of any irregular payment because he did not authorise it.

Petroleum Secretary Abid Saeed, in the presence of the minister, initially said the training fund was not used to meet litigation expenses. When pressed, he said the training fund was not used for litigation purposes ever since the current government came to power. “In the previous government, some funds (meant for training) might have been used for litigation but this was done with the concurrence of the finance ministry and other stakeholders,” he said.

The official record, however, suggests that except a minor expenditure all the money was used during the tenure of current government. Allen & Overy was paid 3.338 pounds sterling between June 18 last year and February 21. Similarly, BRG was paid $1.44m between Sept 2013 and January while 75,000 pounds were paid as legal fee in January last year. Mian Gul Hassan was paid Rs7.15m between April 20 and 28 this year and $37,600 between June last year and May 2014.

Sources, however, said the litigation expenses should have been borne by the Sui Southern Gas Company which acquired LPG firm Progas which later resulted in $573m international arbitration instituted by a UK-based alleged shareholder of Progas.

The SSGC board had resolved to shoulder the cost but a retired legal director persuaded the government to take things under its control. He also continues to be paid out of the training fund since February last year although he was hired for three months for a different assignment.

The arbitration proceedings begun in December last year are still in progress before a tribunal of the International Centre for Settlement of Investment Disputes under arbitration rules of the United Nations Commission on International Trade Law.

Petroleum Minister Abbasi confirmed that a contractor hired for development of Nashpa gas field in Kohat had run away and it was also found that the state-run Oil and Gas Development Company had not acquired a proper bank guarantee from the contractor.

He said somebody would need to be held accountable for the lapses involving critical and strategic public interests and for failing to take appropriate and timely decisions. The failure of the contractors to perform, he said, had delayed project commissioning, depriving the nation of 350m cubic feet of gas, almost equal to the entire circular debt if this gas was to be used for power generation.

The minister said the quality of construction of a flagship Rs850m Petroleum House built in Islamabad was so shabby that he could not risk moving officials there although the purpose-built building was completed on paper some time ago. He said he wished the journalists could visit the building and even a bird’s eye view would expose many faults.

Published in Dawn, September 29th , 2014