SIFC takes notice of delay in LNG terminal project

KARACHI: The Special Investment Facilitation Council (SIFC) has taken up the issue of inordinate delays in the LNG terminal project at Port Qasim, Karachi, being developed by Global Energy Infrastructure Pakistan (GEIP), which blamed the authorities for causing hurdles in the way of smooth execution of the project.

SIFC has convened a meeting on January 9 to look into the issue of the project after GEIP communicated the council about the delays in the project due to actions and policies of Port Qasim Authority (PQA) and Oil & Gas Regulatory Authority (OGRA).

GEIP is developing an integrated LNG project, consisting of supply of LNG/RLNG to bulk customers and construction and operation of an LNG receiving terminal project at Port Qasim, Karachi. For which, it has procured land from PQA, obtained all NOCs and maintained a bank guarantee of $ 1 million. The project is being developed as a private-to-private undertaking at the owner’s risk and cost, requiring no guarantees or capacity payments from the government of Pakistan, for which $ 20 million have already been spent on the project, the official letter of the company written to SIFC stated.

It said that imported LNG shall be delivered to customers via pipelines in the South, where capacity permits, and via a virtual pipeline to others. Power China has partnered with the project and envisioned to undertake the EPC, along with running technical operations of the terminal, once constructed. They have also committed to financial arrangements, through short-term bridge financing and bringing other investors from the energy sector.

However, despite the progress and investments, the project is facing hurdles due to inconsistent policies and the indifference of the authorities, the company said and pointed out that PQA attempted to encash its bank guarantee of $1,000,000 (one million dollars) without notice, in violation of the Implementation Agreement (‘IA’) between the two parties. The Sindh High Court granted a stay against the encashment.

PQA also tried to retroactively apply its new policy of 2019 in spite of having executed an agreement with GEIP well before. This is illegal as it means unilaterally backing out of an executed and in-force agreement. The Sindh High Court, recognizing the investment made and the sincere efforts at project execution, granted the stay.

The letter said that the project had remained in compliance with all stipulations of the IA, and PQA continues to demand and receive the rent for project site, which is cleared annually, up to June 2024. The company also raised the hurdles on part of OGRA and pointed out that it has been diligently obtaining extensions in light of changing circumstances, time to time, in fits and starts, which is uncomfortable for foreign investors as they would like a sufficient time to mitigate risks and close with banks for financing. The latest extension is expiring in February 2024.

GEIP requested SIFC to direct PQA to nominate a negotiation committee under PQA board with the mandate to reach an out of court settlement with GEIP within ninety days as well as to enable GEIP to proceed with the project development as per the IA executed between PQA and GEIP, allowing sufficient time for financing and construction of the project. It also asked SIFC to advise OGRA to suspend deadlines and allow unrestrictive timelines for private to private investment projects in view of the country’s current economic environment.