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Friday March 29, 2024

Dispute on Nashpa LPG plant: Sanity prevails as OGDCL, Chinese firm show flexibility

By Khalid Mustafa
October 08, 2019

ISLAMABAD: At last sanity prevailed as both the parties -- OGDCL and Chinese firm HBP which earlier refused to budge from their hard stances on Nashpa LPG plant ultimately showed flexibility here on Monday apparently because of the intervention from governments of Pakistan and China.

The Chinese company HBP that closed down on September 26 the Nashpa gas processing and LPG recovery plant on account of modification in the plant and was supposed to run the plant on September 30, but it closed all the operations and shut down the plant arguing unless and until its demands are met, it will not run the plant. HBP had put the charter of demands asking for immediate payments of over $100 million ($51.06 million because of breaches by OGDCL of its obligations under contract and $31 million as pending payments and $14.8 million in the head of Advance Bank Guarantee and $3.7 million as Advance Bank Guarantee for supplying of items). It also demanded from OGDCL the grant of an extension of time for completion of project till October 31, 2019 and strictly compliance of all its obligations under contract to ensure that no further delays are caused in the completion of the project and also asked OGDCL to issue the Performance Acceptance Certificate for the project.

However, OGDCL top management got irritated and in return detained Chinese experts in the camp at the site and also deployed the security forces around the camp. More importantly, it started the process to en-cash performance guarantee of HBP amounting to $14.8 million. This step by OGDCL has virtually attracted the attention of the Petroleum Division and Chinese government after the follow up story published in The News on Monday over the situation emerged out of closure of LPG plant by HBP.

Petroleum Division, which cannot afford any kind of shortage of LPG in the market particularly at a time when the winter season has begun in northern part of Pakistan including KP province, played vital role in resolving the issue. Omar Ayub Khan, Petroleum Minister said that issue between the Chinese firm and OGDCL has almost been resolved as he had given the task to his additional secretary to look into the matter and resolve it on emergent basis. Secretary Petroleum Division confirmed to The News saying issue has been now resolved.

Meanwhile, top official of OGDCL said that the ice melted here on Monday between the two parties when Chinese firm wrote a letter to General Manager Project of OGDCL requesting to have access to the operational site of the project to run the plant.

The letter written by Vice President of HBP Xiao Rong of which copy is exclusively available with The News with the subject, “Request to access the site for resumption of LPG plant start-up and other activities against contract No PROC-FC/CB/PROJ/1247/768156/2015 for Nashpa LPG processing plant.”

The letter mentions saying, “When the completion of the project is very close and plant is about to be handed over after modification, we would like to convey our sincere approach to OGDCL for start-up of plant from October 7, 2019. In this regard, we would request OGDCL to allow HHGTL’s project team to access the site and to perform the start-up of plant and other activities. Considering the sensitivity of the plant, it could lead towards a disaster if any third party interrupts the project activity. Moreover, we would request OGDCL to withdraw encashment notice of $14.8 million performance bank guarantee.”

When contacted, OGDCL Spokesman Ahmad Hayat Lak confirmed that HBP has formally approached OGDCL and requested for allowing their team’s access to the site to undertake their activities.

He said, “HBP’s request is under consideration as OGDCL is desirous of proceeding further within the framework of the contract. OGDCL wants Performance Test to be completed by the contractor as per agreed specifications and parameters. It is expected that the matter would be dealt with in a positive spirit and contractor would discharge its contractual obligations to avoid recurrence of such incidents.”

To a question, he explained that contractor staff is free to go anywhere as per their security protocol. They were denied access to the operational area in the interest of protecting the plant and facilities in view of their earlier conduct as regards Distribution System software and passwords.

Mr Lak said in response to the letter of Chinese firm, OGDCL will also write the letter inviting responsible representatives of the contractor for providing necessary assurance as regards plant security and integrity to enable the company to allow them access and proceed further. “We expect resolution very soon. We will also ensure that HBP will not arbitrarily close down the LPG plant.” When asked about the charter of demands of HBP, spokesman responded saying that OGDCL top management has already constituted 5-member committee to look into the issues in detail, but in haste HBP took the extreme step and closed down the plant knowing the fact that its production has a reasonable share in the country’s total LPG production and it will cause the huge shortage in the availability of the product.

To a question, he said OGDCL engineers successfully managed to decode all operations and run the plant and as of today (Monday) it has started producing the 150 metric tons of LPG, but it will gain the momentum with the passage of time. However, the capacity of the plant to produce LPG stands at 375 metric tons per day which can only be attained when HBP will conduct the performance text.