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Top boss under fire for penalising PGPL

Updated December 13, 2017

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ISLAMABAD: As the government secured additional Lique­fied Natural Gas (LNG) from first re-gasification terminal on Tuesday, a top executive of a public sector LNG firm appeared to be under fire for imposing penalties on the second terminal.

Informed sources told Dawn that Azam Sufi, Managing Director of Pakistan LNG Terminal Limited (PLTL), had posted a $10 million penalty on Pakistan GasPort Limited (PGPL) for continuous delay in the commissioning of its terminal beyond a revised deadline.

PLTL — a company under the Petroleum Division — had earlier imposed a $30m penalty on PGPL when the terminal did not come online in June as originally committed. The PGPL contested the penalty and is under the arbitration on the issue. Prime Minister Shahid Khaqan Abbasi has been publicly criticising the penalty imposed on PGPL.

Sources said Mr Sufi was called to the Prime Minister Secretariat and asked to withdraw the penalty or tender resignation. He declined both and is reported to have contended that he was not ready to face accountability processes and would move as required under the rules unless ordered in writing by the forums concerned.

These sources said the board of directors of PLTL was called on Tuesday for the removal of Mr Sufi but disagreement was reported among members over the legal merits and demerits of the removal.

Mr Sufi is reported to have imposed the penalty after the PGPL terminal suffered re­­pea­ted problems and could not achieve commissioning by November 28 as required. The terminal’s three joints are reported to have collapsed on December 2, 8 and 10 respectively during the course of gas pressure build up.

A couple of ships carrying LNG and waiting for processing at PGPL terminal were diverted and two other orders deferred. A PLTL official said the PGPL has now given a revised commissioning date of December 23 but was still unlikely to be banked upon.

PGPL, said the official, was liable to pay $300,000 per day for the delayed commissioning under the agreement and the prime minister could issue orders for its suspension. He said a deputy attorney general contesting the PLTL arbitration was also under pressure to go easy on the earlier penalty.

The government and the Oil and Gas Regulatory Authority (Ogra) have already allowed around Rs60 billion expenditure for laying of distribution lines on the recommendations of parliamentarians even though domestic natural gas is significantly short of meeting existing consumption.

Meanwhile, the Engro Elengy Terminal Private Limited (EETPL) and Sui Southern Gas Company (SSGCL) have signed an LNG Supply Agreement (LSA) for provision of additional 200mmcfd gas.

The agreement was signed by CEO EETPL, Jehangir Piracha and Acting MD SSGC, Amin Rajput, in the presence of Minister of State for Petroleum, Jam Kamal Khan.

Mr Piracha said importing natural gas was a more economically viable source of energy since it was not only cheaper but also more efficient fuel for power generation and the new agreement was a testament to the resolve to meet the rising demand of gas in the country and fuel economic growth and help alleviate the energy crisis.

He said Engro Elengy won the bid in 2014 for the construction, commissioning and operation of the First LNG terminal of Pakistan and completed the process in a record 332 days.

The terminal has a peak capacity for regasification of up to 690mmcfd of LNG. Since Jan 2017, the terminal has increased its output to 600mmcfd from 400mmcfd to meet the rising demand of gas across the country.

With the recent amendment in the LNG supply agreement between SSGC and EETPL, tolling rate for the additional 200mmcfd will be 0.1745 US$ per mmBtu, which is lowest in the region and will bring down the overall rate of 600mmcfd to 0.4799 US$ per mmBtu.

He said the terminal was operating at one of the highest utilisation rates in the world and providing savings of between $1.2bn to $1.5bn to the national exchequer through import substitution of expensive furnace oil.

Published in Dawn, December 13th, 2017