Import of liquefied natural gas (LNG) has stirred fresh controversy in a fractious provinces-federation relationship in the country. Natural resources have remained an incendiary causative factor behind a turbulent relationship between provinces and federation.

Sindh and Balochistan are energy basket of the country yet both receive meagre returns of their contribution in an energy starved country. Oil and gas producing areas in both provinces are conspicuous by emaciated indicators of human development. Communities in the vicinity of oil and gas fields are afflicted by chronic deprivation and perennial poverty.

An inexorable commotion in Balochistan and a simmering resentment in Sindh partly stem from an unrelenting plunder of their natural wealth. Federal bureaucracy’s attitude has been a disgusting reminder of colonial scoundrels. Its incessant voracity for controlling resources of smaller provinces has inflicted bleeding wounds upon the federation, yet it seldom exudes even a tad of sanity.

Importing LNG from Qatar is recent in the series of outlandish idiosyncrasies of the federal government. Sindh being the largest gas producer has vociferously castigated this queer decision. The chief minister of Sindh has asked the federal government to immediately stall the import of LNG and refer the matter to the Council of Common Interests (CCI) for a decision, failing to which the provincial government reserves the right to seek adjudication by the Supreme Court.

The Sindh government has pertinently invoked Article 158 of the constitution. The article reads "the province in which a wellhead of natural gas is situated shall have precedence over other parts of Pakistan in meeting the requirements from the wellhead." The article of the constitution also formed the basis of a landmark decision by the Peshawar High Court in 2010 that recognised KP’s priority right over the gas being produced within the province. This constitutional obligation is blatantly flouted in case of Sindh and Balochistan.

According to Pakistan Energy Year Book, Sindh and Balochistan contribute 68 and 19 per cent of national gas production respectively. However, Sindh and Balochistan consume only 55 and 30 per cent of their production. In a sharp contrast Punjab consumes almost eight times more gas than its own production. Obviously gas from Sindh and Balochistan is piped to Punjab that does not even compensate other provinces and keeps devouring their energy resources without belching.

Access to cheaper energy resources has enabled Punjab to feed its sprawling industry and domestic consumers that contributes towards better state of human development in the province. Rapid growth of CNG stations in Punjab can be cited as a pertinent example here. According to the data available on Oil and Gas Regulatory Authority’s website, Punjab has 2162 operational CNG stations compared to only 587 in Sindh, the largest producer of natural gas.

Spiraling deficit of gas production has freaked Punjab to import LNG from Qatar to contain its widening energy gap. A special terminal for this purpose has been developed at the Port Qasim. The government is paying $270,000 per day (i.e. more than Rs. 800 million per month) to Engro to comply with contractual obligation. In addition to port charges, PSO, SSGC and SNGPL will also charge their administrative cost. This will be further swollen by transportation cost. The amount will be ultimately billed to mouth-zipped consumers. Principally such an arrangement should have been discussed and agreed upon by all stakeholders including consumers.

The process of awarding contract is also opaque. Put together, consumers will have to pay an additional $5 per MMBTU to avail imported gas. Adding all expenses and the import price, the estimated cost of per MMBTU of LNG would oscillate between $12 to 14.5; around three times higher than locally produced gas. Oil prices have recently tumbled in international market. Consequently LNG prices have dipped to around $7 to 9 per MMBTU. This makes the negotiated tariff with Qatar questionable.

Since the government wants to swap imported gas with Sindh’s own produce, consumers in Sindh will have to pay this additional cost. Sindh can easily meet its needs from its own production. Punjab is the only province having gas deficit. If article 158 of the constitution is applied in letter and spirit, except Punjab no other province would require imported LNG.

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The Sindh government laments that it was not consulted by the federal government at any stage to take shared decisions on import, transmission, health safety, environment, pricing etc. Energy department of Sindh in a recent missive addressed to the minister of petroleum has strongly protested the planned swapping of natural gas produced in Sindh with imported LNG. Under the planned swapping arrangement imported LNG would be injected into SSGCL transmission system and in turn the entire natural gas produced from Sawan and Zamzama gas fields of Sindh be diverted to SNGPL transmission system. Sawan field of Khairpur and Zamzama gas field Dadu produces over 1,100 MMBTU/day gas. SNGPL supplies gas to Punjab and Khyber Pakhtunkhwa. Obviously the proposed swapping arrangement, without the concurrence of the respective provincial government, is arbitrary and a brazen contravention of Article 158.

Since the PML-N government has its constituency in Punjab so it wants to protect its interest at the expense of consumers’ interest in Sindh. If the imported LNG is supplied to industrial, commercial, domestic, power generation and fertiliser units in Sindh, consumers will have to pay higher price of the gas despite producing enough gas to meet its own needs. In a blatant infraction of rules of business, the federal government did not take decisions at the CCI forum where all provincial governments have equal representation.

The federal government skirted the CCI and took decisions through Economic Coordination Committee (ECC) and the cabinet committee on energy; both not competent for such decisions. Under the federal legislative list part-II of the constitution, mineral oil and natural gas (including LNG as no specific form of gas has been mentioned) fall under the purview of CCI. Hence ECC and cabinet committee have no role in the matters pertaining to LNG unless CCI forum takes a principle decision first.

Against this backdrop, the Sindh government rightfully protested and termed such decisions unconstitutional. Sindh has demanded the federal government that the import of LNG, its ancillary matters such as continuous and uninterrupted supply of LNG, its pricing, storage, transmission, distribution amongst provinces, swapping, revised natural gas tariff, losses etc and its possible use in power generation in the country may be placed before CCI for discussion and decision.

The government of Sindh has further demanded that all relevant reports/documents such as copies of ECC summaries on LNG, services agreements, LNG supply-sale-purchase agreement, feasibility and technical reports, term sheets, detailed description of LNG transmission across Pakistan including/excluding swapping, exact details of the swapping mechanism, monitoring mechanism for swapping, existing and revised natural gas tariff, Gas Development Surcharge (GDS) etc may be shared with the provinces. Moreover, provincial government representatives may also be included in the LNG price negotiation committee.

The federal government has also been trashing article 172 (3) of the constitution that recognises equal proprietary share of province in the mineral oil and gas produced within its territorial limits including off shore resources. The federal government has been undertaking oil and gas related business through an unconstitutional ministry of petroleum. Since the very subject is under the ambit of CCI, no other body has any mandate to take any decisions or running the business of its subjects.

Similarly, public sector entities e.g. SSGC, PPL and OGDC are operating in complete disregard of constitutional obligations. All these bodies have their producing fields in Sindh and Balochistan yet there is negligible representation from Sindh and Balochistan on their boards and senior management. People from these two provinces are not considered for senior positions in the corporate offices of these organisations. Even provincial quota allocated in the constitution is not observed in these organisations.

Protracted disrespect to constitutional obligations and ignoring people from energy producing areas in jobs and decision-making has converted these entities into new east India companies who operate in the two provinces only to drain their resources. Balochistan has already erupted and people in Sindh are seething with exasperation. If federal bureaucracy did not shun its impudence to provinces, consequences will be far more intractable than the gas shortages.