PPIB accused of placing Rs736mn burden on SNGPL

ISLAMABAD: Sui Northern Gas Pipeline Limited (SNGPL) has reportedly accused Private Power Infrastructure Board (PPIB) of placing an illegal financial burden of Rs 736 million on it with regard to capacity payment meant for four Independent Power Producers (IPPs).

PPIB is advocating the cases of Saif Power Limited, Sapphire Power Limited, Orient Power Limited and Halmore Power Limited according to which Rs 750 million will be paid to them without generating a single unit because SNGPL had failed to supply gas.

Federal Cabinet which is scheduled to meet on Wednesday (today) with Prime Minister, Syed Yousuf Raza Gilani in the chair will hear both sides of the argument.

According to SNGPL, under the provisions, gas supply remained suspended due to force majeure as per following details: (i) SSGCL's 24" dia gas line supplying gas from Zamzama gas field was ruptured on February 28, 2011 and repaired/ supplies resumed on March 2, 2011. Allocation to IPPs remained totally suspended from March 1, 2011 to March 2, 2011; (ii) due to terrorist attack at Maramzai gas field which resulted in killings and kidnappings of MOL's personnel, supplies remained suspended up to March 11, 2011. IPPs were being supplied 31 mmcfd gas with 18 percent curtailment of their supplies. Full supplies to IPPs were restored on March 11, 2011.

Official documents available with Business Recorder reveal that SNGPL in its strongly worded reply to PPIB's proposal said that suspension of gas supply to the IPPs was restored as a last recourse to keep transmission system operational. These incidents, being beyond the reasonable control of SNGPL, constituted events of force majeure under the provisions of the GSAs executed with the IPPs.

SNGPL argued that these incidents caused severe reduction in gas supplies which led to large gap between demand and supply position and aggravated the situation to a level beyond its control as the transmission pack dropped very rapidly to an alarming level for operation of compressor stations and would have led to tripping of compressors.

The impact of suspension of supplies from Zamzama and Marmzai gas fields left no other option for SNGPL but to invoke the provisions of the executed GSAs by declaring force majeure.

However, as soon as supplies from Zamzama gas field resumed, gas supplies to these IPPs were immediately restored by curtailing around 7 mmcfd  gas to each of the four new IPPs in addition to proportionate curtailment in gas supply to other IPPs namely Rousch. FKPCL and Altern Energy operating on SNGPL system to nullify the impact of suspension of 50 mmcfd gas from Maramzai gas field. Gas supplies up to the allocated gas quantities of 38 mmcfd have been restored to the IPPs from March 11, 2011 after resumption of supplies from Maramzai gas field.

"Since the incidents fall under force majeure events in accordance with the executed GSAs, the IPPs have accordingly moved their claim of force majeure to PPIB under IAs and PPAs thereby acknowledging SNGPL's force majeure," said General Manager, Corporate Sales, SNGPL.

The company further argues that as such rejection of SNGPL's force majeure, being in accordance with the executed GSAs and duly acknowledged by the IPPs, PPIB/Ministry of Water & Power, is against the spirit or the terms and conditions of the executed GSAs and is not justified. Therefore, PPIB's position taken to divert the liabilities to SNGPL is not acceptable.

SNGPL, however, proposed that if there is any mismatch between the provisions of the GSAs and IAs/PPAs PPIB should make arrangements for amendments in the IAs/PPAs accordingly in the light of the provisions of the executed GSAs rather than shifting their obligations to SNGPL.

"Since there is no dispute between the IPPs and SNGPL and rather the issue is between NTDC and the IPPs, mediation through joint expert should be restricted to power purchaser and the IPPs as SNGPL is not a party to the PPA/IA," SNGPL management further argued.

SNGPL also clarified that in accordance with the executed GSAs with the 1PPs, the company becomes liable to pay 50 percent of the alternate fuel cost differential, with 50 percent payable by GoP, only in case of its failure to supply gas to any of the  IPPs subject to operation of the IPP on alternate fuel. However, SNGPL understands from the contents of PPIB's letter that these IPPs did not operate on alternate fuel and have requested for lost capacity payments. As such applicability of any penalty on SNGPL is therefore out of question and context.-MUSHTAQ GHUMMAN