LAHORE: Almost after six months of closure, Jamshoro Joint Venture Ltd (JJVL) is billed to resume liquefied petroleum gas (LPG) production from the first week of January after the company and Sui Southern Gas Company (SSGC) reached a new formula for sharing the revenues between them, JJVL Director Razi Ahmed told Dawn on Saturday.

SSGC spokesperson said that the agreement has been directed by the Supreme Court.

Under the new formula, the SSGC will get 57 per cent of the revenues with the remainder going to JJVL as cost for processing natural gas for separating liquid fuel -- liquefied petroleum gas (LPG) and natural gas liquid (NGL) -- from it.

The agreement will hold for one and a half years and can be extended for any period with mutual consent of the gas supplier and the processor.

The plant was shut down in the middle of June this year after SSGC approached the Supreme Court, accusing the JJVL of charging the gas company exorbitant processing charges. SSGC also claimed that it did not require the services of the JJVL plant for processing gas to extract liquids from it. But later it admitted that it did not have that capacity and could not afford to set up a new facility at the moment.

Upon that the court had ordered the two companies to sit together and reach a revenue-sharing formula, and appointed an outside party to help determine a fair revenue sharing formula.

It is third revenue-sharing agreement between SSGC and JJVL, according to a gas company official who spoke on condition of anonymity.

Initially, JJVL, which came into production in 2005, used to pay SSGC a certain amount of royalty and the price of gas supplied to it for LPG and NGL extraction on the basis of the actual gas volumes converted into liquid fuels. The entire LPG and NGL processed at JJVL was sold by SSGC to the processor’s sister LPG marketing company.

However, SSGC went to the court in 2012, pleading that the deal did not treat the state gas company fairly while the processor was making huge profits out of it.

The two companies signed second agreement in 2013 under which JJVL was given a certain amount of fixed processing charges only with SSGC retaining the ownership and marketing rights for the extracted liquids. Since SSGC does not have infrastructure to sell LPG and NGL directly into the market, almost 80 per cent of the product again ended up with JJVL’s marketing arm.

Published in Dawn, December 30th, 2018