PLTL action to end contract with PGPL terminal questioned

ISLAMABAD: In an interesting development, Director General of Liquefied Gases (DG LGs) Jabbar Memon has almost charge-sheeted Pakistan LNG Terminal Limited (PLTL) in its 548 worded situation analysis and raised many question marks, saying that PLTL board did not seek approval and guidance from the Petroleum Ministry prior to the decision taken on October 14 to terminate the agreement with PGPCL terminal.

It is quite surprising as the government is not satisfied with the decision of 100 percent state-owned company PLTL of terminating the (Operation Services Agreement) with LNG terminal as this action may give a bad signal to the foreign investors as it can be seen as nationalisation of a private sector company. The foreign investor may not be able to understand the government’s viewpoint as unilateral act of PLTL may tantamount to expropriation.

Memon also said that the impact on first private transaction of third party access such as Trafigua has sought excess terminal capacity from PGPCL and re-entry of Exxon Mobil in Pakistan through LNG might be affected. The PLTL should have examined magnitude of breach and communicated to DG LGs before proceeding with severe action of termination.

The official document namely ‘Situation Analysis’ written on October 16, 2019 by DG LGs, for PetroleumDavison after decision to issue termination notice, of which copy is exclusively available with The News, saying that PLL and PLTL boards should have sought prior approval and guidance of ministry before embarking upon the severe action of termination of OSA (Operation Services Agreement). The document also unfolds that capacity of PLTL to manage the terminal operations is questionable.

The GD LGs in his Situation Analysis also argued and in the same breathe put questions saying that it is essential to understand why the PGPCL reaches to that situation to default. The first step always is root cause analysis. How come new LNG terminal operator will not face same situation? If the reasons were beyond them then such precedence will be very dangerous to terminate Operation Services Agreement. He also berated the decision saying the PLTL actions should be in accordance with OSA and the laws applicable in this context and suggested that PLTL may negotiate and avoid terminating of OSA for long as it may have negative fallout.

He said that PLTL action may give a bad signal to the foreign investors as it can be seen as nationalisation of a private sector company. Foreign investor may not be able to understand government’s viewpoint as unilateral act of PLTL may tantamount to expropriation.