ISLAMABAD: After the sugar, wheat and petrol shortage that has hit Pakistan in the past few months, the country is fast heading towards LPG availability crisis.
The Sui Southern Gas Company’s management and BOD despite clear orders of Supreme Court and positive financial indicators refused to extend LPG extraction contract with (Jamshoro Joint Venture Limited) JJVL opening the floodgates of another energy shortage on a government that is already in thick soup over the oil crisis.
The SSGC decision of cancelling LPG extraction contract will not only bring 15% shortage of poor people fuel and price hike due to heavy import of the same but will also cause losses to SSGC at the tune of Rs370 million annually.
This has been unfolded in a letter written on Monday (June 22, 2020) by JJVL management to Special Assistant to Prime Minister on Petroleum Mr Nadeem Babar that Sui Southern on June 22, 2020 informed JJVL that it will not extend the Supreme Court validated agreement of December 29, 2018 for local LPG/NGL production at JJVL facilities.
The letter of which the copy is also available with The News mentioned that SSGC discontinued gas supplies to JJVL at midnight on June 20, 2020. The sudden discontinuation of 300 metric tons of daily LPG production comes at a time when the country is already reeling from an oil crisis and attendant outcry. The discontinuation of local LPG/NGL production at JJVT will add to the public's hardship.
JJVL production has been catering to the energy needs of over 750,000 homes across Pakistan. The letter signed by Fasih Ahmed also points out saying that SSGC Board meeting of June 20, 2020 in which it was decided to shutdown local LPG/NGL production was attended by at least four directors of SSGC LPG (private) Limited (SLL) whose sole interest it is to ensure that SLL’s LPG import terminal is extensively utilized by encouraging imports and curtailing local production.
It also drew attention towards the media news about the government intention to provide incentives to LPG importers at the cost of local production. Normally, the governments support local production not only by extending protectionist measures but also even by allowing higher pricing to support indigenous employment and generation of taxes, but here the opposite is happing.
In the letter JJVL’s top management urged the government of the day to direct SSGC to resume gas supplies with immediate effect in line with the Supreme Court validated agreement on an ad hoc basis. It also asked the government to direct SSGC to immediately submit all required data to A F Ferguson and Co. for final determination of revenue sharing between SSGC and JJVL as had been directed by SC in December 2019.
The JJVL letter also asked the government to direct SSGC to bring on record the report of their consultant who, JJVL management understands, has recommended that it is not viable for SSGC to set up its own LPG plant and that it should continue arrangements with JJVL. It also asked SSGC to advise the ministry if it has any alternative facilities available for gas processing of local LPG/NGL production.
In the letter, JJVL management also desired to give a presentation in the present in the presence of SSGC Board members so that a fair and transparent decision can be taken in the national interests.
Sources reveal that there was a clear conflict of interest as Mr Waseem, Mr Faisal Bengali and Mr Amin Rajput, who favored SSGC stance of discontinuing supplies to JJVL are also on the Board of SLL a subsidy of SSGC which will import gas and supply in the market causing heavy import bills in already frail economy of the country. The matter was spearheaded by Mr Munam Raziuddin who is head of BoD Risk Committee and has opposed the agreement with JJVL in hand and gloves with the SLL Management and has created a big risk for the company.
However, spokesman for Sui Southern when asked if Sui Southern management has refused to extend LPG contract with JJVL. Plz confirm this development. If yes plz explain the rationale of the decision, respond saying that the last arrangement with JJVL was carried out as per the Supreme Court orders. The contract was for eighteen months only and hence it expired automatically on June 20, 2020. Any continuation has to be based on technical requirement and commercial feasibility. Moreover, it is an interim arrangement and not a permanent and long term solution.
When asked as to why SSGC management and BOD has taken this decision despite the SC clear orders and positive financial indicators which may lead to LPG shortage in the country, he said that SC Order was for eighteen months only. Current gas shrinkage value at JJVL is around 8~10 MMSCFD. Since this volume will be available in SSGC Transmission system, therefore, the gas utility should effectively deploy these volumes in its Transmission network. Multiple avenues would be available for consumption of this shrinkage volumes. Referring to the deployment of gas, he said that it could be swapped to SNGPL, where Transmission UFG is less than 0.5%; 2. It could be provided to KE or other bulk customers, where UFG at bulk customers is minimal; 3. It could be used for building and maintaining line pack.
Spokesman further said that indigenous gas is much cheaper than LPG which is a very expensive fuel valuing at Rs2,400 per mmbtu. Just for comparison sake 8 to 10 mmcfd gas can feed a population of 400,000 households equivalent to Sukkur city. It should also be borne in mind that 76 percent of JJVL production goes to the commercial and industrial consumers.
When drew his attention towards the bitter fact questioning, sir don't you think it is a clear conflict of interests as Mr Waseem, Faisal Bengali and Amin Rajput who favoured SSGC stance of discontinuing supplies to JJVL are also on Board of SLL, a subsidiary of SSGC which will import gas and supply in the market. Don't you think it will escalate the import bill. Spokesman said that there is no conflict as SLL is a 100 percent wholly owned subsidiary of SSGC and SLL Directors are always from the Management and BOD of SSGC. Discontinuation of supply of gas to JJVL is an automatic expiry of the agreement as per Supreme Court Order dated 4.12.2018.
When asked if Mr Raziuddin who is head of BoD risk committee has opposed the agreement with JJVL. Spokesman said no saying as per the draft minutes of the BOD meeting, Raziuddin Munim has consented to the discontinuance of supply of gas to JJVL.