The LPG production from Jamshoro Joint Venture Limited (JJVL) has hit a snag pushing the country towards more imports and a loss to Sui Southern Gas Company Limited (SSGCL).
The extension of the contract between Jamshoro Joint Venture Limited (JJVL) and Sui Southern Gas Company (SSGC) has been pending legal opinion before Law Division since August 21, 2020.
On a proposal by the Petroleum Division, the Economic Coordination Committee (ECC)held on August 21, 2020, took up the issue of JJVL expired agreement with SSGC and had given principled approval for resumption of LPG/ Natural Gas Liquids (NGL) production from the JJVL plant under proposed conditions subject to their endorsement from the Office of the Attorney General of Pakistan.
For fear of NAB, SSGC discontinues LPG extraction agreement with JJVL?
Sources in Petroleum Division told that the division did not receive an opinion from Law Division and it is still pending before Law Division.
The LPG/NGL production facility near Hyderabad Sindh was operating under an agreement approved by the Supreme Court. The Agreement was up to June 20, 2020, and was extendable with the mutual consent of the Parties.
The JJVL further states that SSGC did not extend the agreement with a result that production of about 400 MT of LPG and 120 MT of NGL daily went offline and LPG had to be substituted through imports by expending the much needed foreign exchange. The reason SSGC provided for not extending the agreement was that it was not profitable for SSGC.
Separately, under Orders of the Supreme Court of Pakistan, A.F. Supreme Court had appointed Ferguson and Company (AFFCO) to determine an equitable Revenue Sharing Formula between SSGC and JJVL.
AFFCO has now submitted its report to the Supreme Court and independently assessed that the arrangement between JJVL and SSGC is profitable for SSGC, and thus is in the public interest, JJVL states.
JJVL further states that on a non-related issue of payment of Petroleum Development Levy (PDL), gas supply to JJVL has not been resumed. The PDL issue is pending before the Lahore High Court, and the court has ordered that no coercive action shall be taken.
Based on supplies from JJVL, it states that substitution through costly imports for LPG not produced by JJVL will cost the country over $40 million in foreign exchange annually. It will also affect over $12 million of NGL exports. downstream investment in the value chain has created about 5,000 jobs. To date, since 2005, JJVL has produced over 1.7 million tonnes of domestically produced LPG and over 600,000 tons of Natural Gas Liquids.
In 2003 SSGC awarded the rights for extraction of LPG and NGL from the Badin gas field through a tender process, by signing an Implementation Agreement (IA) with JJVL. Through a long litigation history spanning 17 years, the agreement expired on June 20, 2020.
