Law division yet to give its opinion
ISLAMABAD: The law division is yet to give its opinion on the extension of a contract between Jamshoro Joint Venture Limited (JJVL) and Sui Southern Gas Company (SSGC) as it is pending before it since August 21, 2020.
On a proposal by the Petroleum Division, the Economic Coordination Committee (ECC) in a meeting held on August 21,2020, took up the issue of JJVL expired agreement with SSGC and had given approval in principle for resumption of LPG/ Natural Gas Liquids (NGL) production from JJVL plant under the proposed conditions subject to their endorsement from the office of the Attorney General for Pakistan.
Sources in Petroleum Division told Business Recorder that the division is yet to receive the opinion from Law Division.
On June 20, 2020, SSGC had conveyed to Petroleum Division the decision of its Board of Directors (BoDs) not to extend the agreement, after extensive deliberations on technical, commercial and legal aspects. The arrangement between SSGC and JJVL is a commercial agreement and the BoD is fully empowered under the law to decide the affairs in the best interest of SSGC.
According to JJVL, the LPG/NGL production facility near Hyderabad Sindh, was operating under an agreement approved by Supreme Court. The agreement was till June 20, 2020 and was extendable with the mutual consent of the parties.
The JJVL further states that SSGC did not extend the agreement as a result which production of about 400 MT of LPG and 120 MT of NGL daily went offline and LPG had to be substituted through imports by expanding the much-needed foreign exchange. The reason SSGC provided for not extending the agreement was that it was not profitable for SSGC.
Separately, under the orders of Supreme Court of Pakistan, AF Ferguson and Company (AFFCO) was appointed to determine an equitable revenue sharing formula between SSGC and JJVL.
AFFCO has now submitted its report to Supreme Court and independently assessed that the arrangement between JJVL and SSGC is profitable for SSGC, thus is in the public interest, JJVL states.
JJVL further states that on a non-related issue of payment of Petroleum Development Levy (PDL), gas supply to JJVL has not been resumed.
The PDL issue is pending before the Lahore High Court, and the court has ordered that no coercive action shall be taken.
Based on supplies from JJVL, it states that substitution through costly imports for LPG not produced by JJVL will cost the country over $40 million in foreign exchange annually. It will also affect over $12 million of NGL exports downstream investment in the value chain has created about 5,000 jobs. To date, since 2005, JJVL has produced over 1.7 million tonnes of domestically produced LPG and over 600,000 tons of Natural Gas Liquids.
In 2003, SSGC awarded the rights for extraction of LPG and NGL from Badin gas field through a tender process, by signing an Implementation Agreement (IA) with JJVL. Through a long litigation history spanning 17 years, the agreement expired on June 20, 2020. The JJVL plant had been closed since that date resulting in reduction of domestic LPG production of about 250 tons per day, which was approximately 12 percent of local production.