JJVL plant to be operational based on revenue-sharing formula

ISLAMABAD: The Board of Directors of Sui Southern Gas Company Limited (SSGC), on the direction of Special Investment Facilitation Council (SIFC), is going to approve revenue sharing formula agreed between the gas utility and Jamshoro Joint Venture Limited (JJVL) for making its LPG-NGL extraction plant operational.

“Secretary Petroleum Momin Agha, who is in Baku with Prime Minister Shehbaz Sharif, may join the office tomorrow (Wednesday) and arrange Board’s meeting for getting the nod to the agreement reached between SSGC and JJVL,” a senior official privy to the development told this scribe.

Earlier in January 2024, the SIFC took notice of closure of JJVL LPG-NGL extraction plant from June 2020 and directed the Petroleum Division to help resolve the disputes between the plant management and Sui Southern authorities.

The SIFC wanted to use the plant as an import substitution industry against LPG import and save precious foreign reserves being used for the import of liquid gas.

Since June 2020 till the SIFC took notice of JJVL plant’s closure, the country braved domestic LPG production loss of over 317,000 tons with domestic NGL production loss of over 127,000 tons. More importantly, the government has to face additional burden of over $193 million because of import of LPG to substitute for JJVL LPG production.

In addition, the official said, the country also faced a loss of export earnings from NGL amounting to over $86 million. This is how total system loss from shutdown of JJVL to the economy stayed over Rs94 billion.

“However, Executive Committee of SIFC, which met on January 22, 2025, has decided JJVL LPG-NGL extraction plant must be made operational without any further delay, given the national objective of maximising domestic production of LPG,” reveals minutes of the meeting.

After getting a nod from the parties to the dispute, the SIFC also asked for agreement based on revenue sharing at 66:34 ratio (SSGC:JJVL) with 25 LPG share for SSGC based on Ogra-notified producer price. This will ensure Rs2 billion per annum to Sui Southern. The LPG plant would be functional after a lapse of four years and eight months.

“This ratio has been worked out as being well above ad-hoc/provisional revenue share of 57:43 endorsed by Supreme Court of Pakistan,” the minutes show.

Revenue sharing of 66:34 is based on actual sales value to SSGC, considering actual sales-mix of fertilizer (31pc), process (27pc) and captive power units (42pc) connected to SMSs i.e., FJFC and FFBQL. Additionally, in the event of price revisions by Ogra or changes in sales-mix/consumer categories by federal government, revenue sharing ratios between the parties will be reviewed and revised accordingly.

It was also decided in the SIFC meeting pending undisputed dues, payables to SSGC by JJVL will be cleared before resumption of gas supply to the plant.

Moreover, the FIA inquiry will be concluded on merit at the earliest, and to this effect, Minister of Petroleum or Petroleum Division will be kept on board.