Gas company chief ordered to sign LNG deal or pack up

Published April 20, 2015
According to sources, LNG has not been arranged so far and the Engro terminal has been processing nothing since April 16. — Dawn/file
According to sources, LNG has not been arranged so far and the Engro terminal has been processing nothing since April 16. — Dawn/file

ISLAMABAD: In dramatic circumstances, three public sector stakeholders of liquefied natural gas (LNG) have ‘initialled’ a tripartite agreement to facilitate import of the commodity through back-to-back guarantees amid resistance by their managements.

This comes at a time when the first encashment of $50 million guarantee becomes due in a couple of days because of failure of the government side to arrange imported LNG in time for re-gasification and transmission into the national network through the Engro terminal at Port Qasim.

According to sources, LNG has not been arranged so far and the Engro terminal has been processing nothing since April 16.

Read: LNG refill from Qatar in limbo as ministry, customs lock horns

“Unless Engro waives its service charges in goodwill, it has to encash SSGCL’s guarantee on April 21,” said an official.

The sources said technical and legal teams of the Sui Southern Gas Company Limited (SSGCL), Sui Northern Gas Pipelines Limited (SNGPL) and Pakistan State Oil (PSO) were kept in Islamabad for more than three days to enter into the tripartite agreement.

The managements of SSGCL and SNGPL were reluctant to sign the agreement handed over to them by the PSO and Interstate Gas Company Limited (ISGCL) because it put all liabilities of failure in LNG supply on the gas utilities.

“The officials of SSGCL and SNGPL were virtually made hostage for almost three days and coerced into signing the agreement with PSO for import and re-gasification of LNG,” said an official of the petroleum ministry, adding that the representatives of the two gas utilities were not ready to sign the agreement without approval of their boards.

“They were kept sitting late after midnight to pressurise them into signing the agreement,” said a member of the board of directors of one of the companies, adding that such signing without approval by the management and board was a violation of provisions of the Companies Ordinance, articles of association, code of corporate governance of public sector and rules and regulations of the Oil and Gas Regulatory Authority.

“The agreement will expose the companies to financial risk and the GoP being a major shareholder will have to ultimately pick up the losses to benefit a particular party,” he said.

The sources said the Ministry of Petroleum and Natural Reso­urces had asked the managing directors of the three companies on Monday to sign the agreement or get ready to go home. “One of the three MDs has initialled the agreement and linked its signing with the approval of the board of directors,” an insider said.

On Friday last, SNGPL Managing Director Arif Hameed was called to sign the tripartite agreement, but he refused to oblige without clearance from the board. He was told to resign if he could not sign the agreement. Mr Hameed is reported to have left the company without signing the deal.

A member of the SNGPL board told Dawn that Mr Hameed had been called back to the SNGPL headquarters by the board of directors who assured him of their full support and advised him not to resign or sign any agreement without first consulting the board.

Under the previous LNG supply agreement, it was explicitly committed in the minutes of board meetings of the SSGCL and SNGPL that in case of failure to provide re-gasified LNG, the PSO would pay the penalty. According to official sources, the PSO has so far failed to enter into a sale-purchase agreement with Qatar Gas or any other supplier.

Also, it was a collective responsibility of the PSO, ISGCL and, indirectly, of Engro and Port Qasim that the channel for traffic of big ships was of the required depth, said a member of the board of directors of a gas company.

He said the primary question that should be investigated at the highest level was as to who had prepared the request for proposal for terminal construction under which Engro had been selected as the terminal operator and who had prepared and signed off the LNG supply agreement which put the entire liability on gas companies, despite the fact that they were at the fag-end of the supply chain.

The board member said he had been told that the petroleum ministry had threatened to remove not only the managing directors of SNGPL and SSGCL inducted a few months ago but the entire boards of directors unless they fell in line.

Published in Dawn, April 20th, 2015

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