ISLAMABAD: At least two leading investigation and accountability agencies are examining gas allocations made during the last few days of the PML-N government allegedly in violation of the gas allocation policy and without concurrence of the provinces.

Informed sources told Dawn that the gas allocations had come under scrutiny after the petroleum division of the Ministry of Energy had on May 31 — the last working day of the PML-N government — pointed out that 75 million cubic feet of gas per day (mmcfd) had been dedicated to Pak-Arab Fertiliser on almost round-the-year basis.

This was done without bidding like in the previous case of Engro Fertiliser that secured domestic natural gas through bidding from the same Mari gas field. Gas has been given to two fertiliser units of the same group, instead of domestic consumers of Sui gas utilities which have top priority in the gas allocation policy and have been facing decline in gas supply, particularly in winter.

Move termed violation of policy and without concurrence of provinces

The sources said record was also being examined to rule out the possibility of conflict of interest in gas transactions because of key inter-linked people working in the related companies and organisations. This is crucial because three Punjab-based fertiliser plants have been seeking 70mmcfd of domestic gas along with 70mmcfd of imported LNG in view of the gas policy that required general industry, particularly textiles and fertiliser, to equally share the local and imported gases for pricing reasons.

The provinces have already been protesting over the dismantling of Mari Petroleum’s pricing formula approved by the Economic Coordination Committee (ECC) of the cabinet during the PML-N tenure which, they claimed, caused a loss of more than Rs50 billion to the provinces on account of gas development surcharge. Sindh, Balochistan and Khyber Pakhtunkhwa have also been insisting that allocation of gas was in fact a domain of the Council of Common Interests (CCI) after the 18th Amendment.

But under the latest decision, the entire 70mmcfd was allocated for Fatima Group of leading businessman Arif Habib who previously served as a member of the SNGPL board. Third fertiliser plant of Agritech was left out. The catch is between Rs600 per unit of local gas, compared to almost Rs1,500 per mmbtu of LNG.

In its letter to the chief executives of three gas and fertiliser companies — Pak-Arab Fertilisers Ltd (PFL), Mari Petroleum Company Ltd (MPCL) and Sui Northern Gas Pipelines Limited — the petroleum division said the ECC had approved its request to “allocate 35mmcfd Mari Shallow gas along with supporting reserves to M/S PFL” which would require dehydration and transportation by PFL at its own cost for injection into SNGPL which would induct this gas into its system soon after completion of the required infrastructure.

Also, 40mmcfd of Mari Deep gas along with supporting reserves may be allocated for PFL which will be processed by PFL at its own cost for injection into SNGPL system as a commingled stream along with shallow gas. MPCL was ordered to secure regulatory approvals for production of these fields from its existing reservoirs. SNGPL will get a tolling fee for transportation of these gases.

Petroleum Secretary Sikandar Sultan Raja defended the decision and said the gas was of low quality, belonged to MPCL and could not be transported without an investment of $70 million which the seller — MPCL — was not ready to make. He said MPCL negotiated with Pak-Arab which was ready to invest in its plant that had been struggling with gas supply since 2012.

In that situation, Mr Raja added, the gas plant would have remained idle and the fertiliser plant in problems had this transaction not been allowed. He said MPCL had offered the facility to many and found PFL’s terms acceptable.

On the other hand, the Fertiliser Review Committee had been demanding gas supplies to fertiliser plants to avoid the looming urea shortages and resultant imports.

The petroleum secretary’s director, Rasheed Jokhio, said SNGPL had declined to supply gas to any fertiliser plant because it was not according to the gas allocation policy that prioritised domestic, commercial, industrial and fertiliser consumers in that order. He said the Fertiliser Review Committee had recommended LNG sales at Rs650 per unit that was an imported project and subsidy was not possible.

He agreed that the gas allocations by the ECC and CCI had been a disputed subject for quite some time without a resolution and the apex court had also not settled the matter yet. He said there was no room for the bidding of gas like Engro which was a Greenfield project, while the PFL plant was an existing one and almost closed down.

The sources said former Prime Minister Shahid Khaqan Abbasi had just before leaving the office given 75mmcfd of Mari system gas to PFL which had already defaulted on billions of rupees to SNGPL and Sui Southern Gas Company that were blocked at the highest level not to encash PFL’s guarantees.

During summer 28 per cent system (local) gas is provided under the gas allocation policy to the industry. PFL was not willing to receive 28pc share of the system gas as industry and instead wanted 50pc system to be viable. Now 50pc system gas was not available and against the policy facilitated by creating a new precedent.

A few senior government officials had earlier dismantled the GPA (gas purchase agreement) of Mari gas some five years ago owing to which the provinces lost hundreds of billions of rupees in GDS revenue. The dismantling of GPA was again illegally done at the ECC forum instead of the CCI.

Also Mari gas has been saved from incurring expenditure on purification of gas which it is obligated to undertake.

The ECC summary says that gas companies will supply 35mmcfd Mari gas thru mixing of their system gas to make it specification gas. This proves that this 35mmcfd could have gone straight into the system.

On the other hand, the textile sector gets only 28pc of its demand in summer and no system gas in winter. MPCL, being a public sector company, should have gone for bidding as required under the procurement rules that may have attracted a better price with higher economic output of a scarce national resource. The source said it appeared that a few officers belonging to or having close contact with the petroleum division had planned shady business deals for MPCL without keeping the military establishment in the loop to show better profits without explaining the cost to the exchequer.

Published in Dawn, June 4th, 2018