Govt can’t afford delay in LNG deal, says minister

ISLAMABAD: The top management of Sui Northern Gas Pipeline limited (SNGPL) has emerged as the biggest hurdle in the way to smooth transaction between Qatar and Pakistan on LNG deal that has already delayed by over 5 months and this is the main reason why Prime Minister Mian Nawaz Sharif was left with no option but to sack the managing director of the gas company.
However, the restoration of Arif Hameed, SNGPL Managing Director by Lahore High Court (LHC) under stay order has aggravated bickering between Nawaz government and the top management of the SNGPL. Though the LHC has summoned the two parties on September 17 for hearing in the petition of Arif Hameed arguing the dismissal is illegal. But the legal fight may deprive the country of the smooth LNG supply from Qatar for longer time as the LNG deal has already delayed by over 5 months as it was to be inked and operation by April 1, 2015.
However, when contacted, Shahid Khaqan Abbasi, Minister for Petroleum and Natural Resources said that the government did not ask anything illegal to the managing director of the company to do in the agreement. He said that the government could not afford further delay in the LNG deal with the Qatar keeping in view the increasing energy crisis in the country and to this effect the ministry had convened the meeting of Board of Directors on September 10-11 to decide the fate of the incumbent managing director as per the rules. When the BoD will decide, there would be no objection from any quarter. The minister admitted that the powerful lobbies did not want the sustainable import of LNG which would help the country save $1.5 billion in a year as the electricity to be generated through LNG as fuel would be cheaper than the electricity being generated by diesel and residual furnace oil.
However, Arif Hameed was contacted many times and sent many messages seeking his version, but he opted to remain mum.
According to one of the top officials at Ministry of Petroleum and Natural Resources, MD Arif Hameed was playing in the hands of powerful lobbies of which representatives were perched in the board of directors not allowing him to share the responsibilities in the tripartite agreement. The Qatargas Company also wants the tripartite agreement between Pakistan State Oil, Sui Southern and Sui Northern. In the latest interaction between the Qatargas Company and the government officials in a meeting held in Islamabad, Doha raised the issue of the smooth payment mechanism and the tripartite agreement between the said entities. Secretary Ministry of Petroleum and Natural Resources visited Lahore to convince the board of directors and managing director of the company, but failed to convince them in sharing the responsibilities in the proposed agreement and resultantly this had irked the prime minister.
Chief Executive of Pakistan, who wants to erase the unending energy crisis that has virtually held the economy of Pakistan hostage since 2007 and damaging the GDP growth by 1.5 percent every year, when felt Managing Director of Sui Northern is becoming the impediment just to appease his masters (powerful lobbies representing the tycoons in stock exchange and fuel transactions) has shown him the door.
Meanwhile, Ogra has also highlighted the wrongdoings of the top management of SNGPL in a letter to PSO, Sui Southern and Sui Northern mentioning that the Sui Northern should come up with its agreements with RLNG end consumers for selling the product.
The official at the ministry said that SUI Northern is illegally involved in selling the RLNG to fertilizer, CNG and power sector. So, Sui Northern has failed to recover the cost of the RLNG supplied to power sector so far because of the fact there is no notified price of the LNG, which is power sector did not pay to Sui Northern. This is the main reason that PSO is facing the emergence of another kind of circular debt because of non-recovery of LNG arrears. This means that Sui Northern has provided the LNG to power sector without price notification. And on top of that the top management of the gas utility on its own increased the volume of UFG (unaccounted for gas) from 4.5 percent to 11.87 percent and included its unjustified margins owing to which the RLNG price has increased to $12.50 per MMBTU for CNG sector which is why the CNG consumers are suffering as the CNG is now being sold in litre and its cost is close to the cost of petrol. Power sector also says that SNGPL has included a lot of margins owing to which the cost of LNG has swelled manifold.
The officials said that the government had decided to import LNG with a view to bringing down the cost of doing business and maintaining electricity availability at affordable rates, but the way Sui Northern is selling the product at higher rates without notification of LNG sale price, the whole objective of importing LNG seems to have evaporated. The SNGPL management also fixed the transmission and distribution losses on its own.
The SNGPL is also selling the LNG to fertilizer sector at $11.50 per MMBTU, but the fertilizer sector is directly paying the landed cost of over $8 per MMBTU the product to PSO and not paying the margins to Sui Northern which amount to $3.509 per MMBTU. It means that Sui Northern is sustaining the loss in recovery of arrears from fertilizer sector.
The Ogra has also mentioned that SNGPL is calculating the retainage of the total RLNG without any rational increasing the cost of the product.