Scam of excess payments to LNG suppliers: Energy ministry mobilises for action against MD PLTL

ISLAMABAD: Top mandarins of the Energy Ministry swung into action to immediately suspend the former acting MD PLL (Pakistan LNG Limited) Nadeem Nazir, who is also currently holding the charge of the MD of PLTL (Pakistan LNG Terminal Limited) for making excess payments of $25 million as port charges to LNG suppliers (Gunvor and ENI).

Following the report of excess payments scam amounting to $39.5 million made by PSO and PLL to LNG suppliers (Gunvor and ENI) as port charges in The News on Monday (November 9, 2020), the Energy Minister, Omar Ayub Khan, Special Assistant to PM on Petroleum, Nadeem Babar (who landed here on Monday from the US), secretary petroleum and some other senior officials put their heads together to proceed against the former PLL acting MD, top officials privy to the developments told The News.

"They decided to summon an immediate meeting of PLTL Board of Directors to take action against him. Since he is currently MD of PLTL, the BOD of PLTL will be asked to take action against its MD and initiate forensic audit of payments to LNG suppliers from early 2018 till October 2020." The alarming development in the entire ugly episode is that the PLL (Pakistan LNG Limited) BOD was kept in the dark for two years about the excess payments.

According to the official documents available with The News, it has been disclosed that a committee formed in June 2019 to look into the scam of excess payments recommended stopping them, but the then CFO (existing PLTL MD) continued the additional payments to Gunvor and ENI arguing that it was important to maintain an amicable relationship with both the suppliers. "However, he stopped excess payments to other suppliers."

The Pakistan LNG Limited (PLL) is 100 percent state owned company dealing with import of LNG and PLTL (Pakistan LNG Terminal Limited Company) is also 100 percent government entity dealing with the PGPL terminal. Nazir is also the CFO of both the companies and is now holding the charge of MD PLTL. He was also the acting PLL MD till September 2020. In the USD 25 million scam, all the fingers are being raised towards him in the letter written by PLL board to the Petroleum Division. The PLTL board may also recommend the interior ministry to place Nazir’s name in the Exit Control List (ECL). In all likelihood, Nazir would be made an OSD till the PLL BOD completes the forensic audit of payments. The Chairman of PLTL Board has been asked to convene the board meeting soon for required action against the MD. The spokesman of the Petroleum Division confirmed that it has been decided to take action against PLTL MD. The letter to PLTL board will be written today (Tuesday) asking for required action in the light of the letter by the existing acting MD of PLL Masood Nabi had written to secretary Petroleum Division.

As far as excess payments of $4.5 million made by PSO to Gunvor, the spokesman said that the entire amount has been recovered and the inquiry is underway against GM LNG in PSO, two deputy GMs and two commercial officers.

However, according to the letter written on November 3, 2020 on behalf of the PLL BOD to the Petroleum Division, a copy of which is also exclusively available with The News, the overbilling by LNG suppliers came to the knowledge of the then PLL management back in October 2018. The PLL conveyed its stance to its LNG suppliers (term and spot) in November 2018. One term supplier namely ENI did not agree with PLL’s interpretation, while Gunvor did not respond. According to the letter, over 80 percent of the total excess payments were made to these two suppliers. The former PLL management formed a committee to look into the matter, which recommended stopping excess payments to spot suppliers back in July 2019. Surprisingly, it also recommended continuing the excess payments to the two term suppliers (ENI and Gunvor) for both term and spot supplies ostensibly for maintaining an amicable relationship with both the parties.

Finally, around the end August 2020, the PLL obtained a legal opinion from an English law firm which validated the PLL’s stance about the excess payments made to the LNG suppliers as port charges. While the management of PLL, the letter says, was aware of this issue, since at least October 2018, it was only brought to the knowledge of PLL’s Board of Directors for the first time on October 23, 2020, after two years. The BOD noted that the issue was not brought to its attention for protecting the PLL’s interests in a timely manner.

The board has directed that now onwards payments to suppliers be made strictly as per the new legal interpretation of the PLL contract and disputed the previous excess payments. The board has noted that recovering excess payments may lead to dispute or litigation with the LNG suppliers. Therefore, the next course of action needs thorough deliberations at the board level supported by professional, legal and financial advice.

The letter further says that the PLL Board has directed forensic audit to ensure that the case is examined thoroughly, responsibility is fixed if warranted and recoverable amounts are properly calculated. In the meanwhile, further advice from English counsel is being sought in connection for future course of action.