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October 22, 2019

Termination of contract with PGPCL terminal: Govt can’t take over control of LNG terminal for 90 days


October 22, 2019

ISLAMABAD: Even after the termination of the contract by state owned Pakistan LNG Terminal Limited on October 14 with LNG terminal of Pakistan Port Gas Consortium Limited (PGPCL), the government cannot take over the control of terminal as had been suggested by PLTL and the operation of terminal by PGPCL will continue. The contract allows 90 days to resolve the dispute amicably and during that time the status quo will be maintained.

This has been agreed in a meeting held here on Monday between top officials of the parties to the dispute PLTL and PGPCL. Both the parties have decided not to talk or issue press release to the media persons. However, one of the officials of PLTL said that both parties remained glued to their stances. He also said that the government cannot take the control of the terminal. However, both the parties in the meeting decided to follow dispute resolution process.

One of the top Petroleum Division officials also said that the government has no expertise to run the LNG terminal when asked if the government has any kind of expertise to run the LNG facility. To a question he said while quoting the officials of PLTL that its decision to issue termination notice is legal. “However it is yet to be determined as to whether PLTL decision is correct or wrong.”

The official said that the action by PLTL may force the aggrieved party to move London Court of International Arbitration (LCIA). ‘It was not required to terminate the agreement but because of fear of NAB, PLTL management apparently took the decision to issue to PGPCL the termination notice of the Operation and Services Agreement (OSA) with LNG terminal.’

A senior official of PLTL when contacted said that after termination notice the ball is in the court of the government as to whether it takes the control of terminal or not. However, after invoking the clause 37 of OSA till the settlement of dispute, both the parties can continue to discharge their duties by maintaining the status quo.

PLTL took the plea that JJVL’s guarantee has been downgraded on account of litigation so PGPCL is required deposit the fresh guarantee equal to $10 million in cash or equal to asset of worth $15 million despite seeking the guarantee against the downgrading. However, PGP Consortium Limited in its response to purported ‘Termination Notice’ has termed the PLTL action as illegal, saying any termination of such contract by recourse other than through the procedures laid down in Clause 37 (Dispute Resolution) of the OSA amounts to willful misconduct and is illegal and of no lawful effect. Moreover, any act in furtherance of the purported termination of the OSA will also amount to willful misconduct and accordingly be illegal and without lawful effect.

The Petroleum Division official, however, admitted that the decision of PLTL may invite the criticism from the LNG players in the world and the investment from abroad in private to private model LNG terminals may get slow down or stalled.

Meanwhile the Norway based BW Gas Company in a letter of which copy is available with The News has expressed concern about the arrest of Iqbal Z Ahmad and the purported termination notice to PGPCL LNG terminal by PLTL. The BW Gas Company management says that it has worked very closely with Iqbal Z Ahmad the placing of its $250 million FSRU ‘BW Integrity’ in Port Qasim in late 2017 reflected its confidence on Iqbal Z Ahmad, his companies, PGPCL costumers and Pakistan. The BW Gas Company also expressed optimism saying that the project can be put back on track and that all parties involved continue to support PGPCL terminal.

PGPCL says: ‘We are prepared to seek legal recourse including but not limited to damages under all heads available as per law, which may include, besides others, liquidated damages, damages for loss of business under the contract, loss of earnings and profit, loss of capital, loss of human resources, damage to commercial and personal reputation, lost business opportunities, and any and all other loss or damage suffered, which, at present and without prejudice, is tentatively estimated to be in excess of $1.5 billion.”

It also says: ‘PGPCL is hesitant to burden the country with such a huge liability, particularly with such instances as Reko Diq and Karkey before us, we are also entrusted to act in the interests of PGPC, its members and shareholders.

We, therefore, hope that you will not compel us to take the route which other companies have been forced to take when faced with such irresponsible and impetuous conduct, violative of fundamental rights, on the part of authorities purportedly acting on behalf of the government of Pakistan.

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