SSGC opts not to extend LPG agreement for ulterior motives: JJVL

News Desk

Islamabad: Jamshoro Joint Venture Limited (JJVL) has challenged Sui Southern Gas Company Limited (SSGCL) over non-renewal of LPG extraction agreement saying that state run utility has opted not to extend the term of the agreement clearly for ulterior motives.

In a response to the SSGC rebuttal to the article published in the, JJVL said that it is extremely troublesome and represents the callous manner in which companies owned or controlled by the federal government are operating today.

The rebuttal falsely claims that SSGC “did not discontinue the agreement” with JJVL, and that the agreement was an interim arrangement of 18 months. While it is true that under the supervisions of the Supreme Court, SSGC and JJVL entered into an agreement to ensure the continued extraction of LPG and NGL, the agreement was supposed to hold field until SSGC could develop an alternate arrangement for the extraction of LPG and NGL. This is why the agreement contained a clause that its term may be extended through the mutual consent of the parties.

However, SSGC, clearly for ulterior motives has opted not to extend the term of the agreement. By doing so, SSGC, which is a state-owned entity, with vital task of ensuring the efficient and proper utilization of precious natural resources, has jeopardized not only the energy supply chain in the country, but could also expose Pakistan to international repercussions.

In a statement, he said that the Supreme Court of Pakistan accepted the duration of the contract between SSGC and JJVL to be 18 months, as it was contemplated that SSGC would set up its own extraction plant or would have some other alternate arrangement in place. However, SSGC has failed to set up any extraction facility in the said time period and the alternate it is suggesting (import/smuggling LPG from Iran) cannot be considered a viable option by any stretch of the imagination.

It is possible that SSGC has placed its own interests, and those of its subsidiary company – involved in the LPG import business – ahead of the interest of the citizens of Pakistan. It is absolutely false for SSGC to claim that LPG is not a “poor man’s fuel”, since LPG is the only source of energy which can be utilized in far flung areas of the country, where natural gas supply network does not exist.

SSGC further claims that by discontinuing the arrangement with JJVL, an additional 8 to 10 MMCFD gas would be made available to SSGC system. However, this statement ignores the material fact that the gas injected into the system would be replete with impurities, which would not only cause erosion in pipelines but would also cause meters to malfunction and could potentially be hazardous for consumers because of the variable energy content of the gas being supplied.

Therefore, it is clear that while opting to discontinue the agreement with JJVL, SSGC had no alternate option for local extraction of LPG and supply of “dry” gas to natural gas consumers. The proposals put forward by SSGC are not only likely to have devastating effects for the economy but would also expose Pakistan to crippling sanctions – which the country simply cannot afford in these unprecedented and difficult times.

By suggesting that LPG may be brought in from Iran via the Taftan border, JJVL spokesperson said that it is unclear whether SSGC is proposing the illegal smuggling of petroleum products across international borders or whether SSGC is proposing that LPG be imported despite the sanctions imposed on Iran by the United States of America. Both are equally disturbing options for a State-owned entity to be proposing. The Executive Order No. 13846 dated 06.08.2020 passed by the President of the United States of America has clearly categorized petroleum products, which include LPG, from Iran as prohibited products. Therefore, the import of LPG from Iran would not only expose Pakistan to crippling sanctions, but would also potentially be catastrophic for Pakistan’s hopes to make it out of the FATF “grey list” by the end of this year. It is disconcerting that SSGC seems un-phased by the potentially devastating impact of its suggestion.

The suggestion that LPG may be imported to meet the shortfall in the market also appears to be disconnected from the economic realities of Pakistan, he said adding that the country is already facing a huge shortfall of foreign exchange reserves. It is absolutely baffling as to how SSGC could recommend import of LPG in such a scenario, especially where a cheap local alternative, in the form continuing with the JJVL extraction arrangement, already exists, he added.

SSGC also claims that there is no possibility of shortage of LPG in the country since “there is already a reasonable volume of LPG stock available at Port Qasim alone” further illustrates the short-sightedness of the public sector entity. SSGC itself states that JJVL provides 300 MT of LPG in a day, but fails to state how much stock of LPG is available at Port Qasim. Whatever the quantity of the stocks may be, it is clearly unviable to resort to depleting strategic reserves without a viable supply arrangement to replenish those stocks.

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