MoP allowed to issue LoC to JJVL

National Assembly Standing Committee on Petroleum and Natural Resources has allowed the Ministry of Petroleum to issue Letter of Comfort (LoC) to Jamshoro Joint Venture Ltd (JJVL) to continue gas supply for LPG extraction plant, as the Sui Southern Gas Company (SSGC) has admitted in its report submitted to the committee that Implementation Agreement (IA) between the parties can be extended beyond February 3, 2011 in the presence of PPRA rules.
SSGC further informed the committee that the agreement was signed in accordance with the Law of Contract 1872. The NA body chairman Sheikh Waqas Akram, in a meeting held on Wednesday observed that new plant could take about one year through re-bidding process. "Agreement will not be renewed till that time, however, gas supply will not be disrupted to the company already working on LPG plant as we are not against any party," Sheikh Waqas said adding that during this period re-bidding process can be initiated. He said that JJVL could also participate and win the project again in case of being the highest bidder.
Earlier, Secretary Petroleum Imtiaz Qazi said that "we will have to issue LoC to JJVL to continue gas supply after expiry of agreement on February 3, 2011." The NA body allowed the MoP to issue LoC to JJVL to continue gas supply for LPG extraction plant.
Managing Director (MD) SSGC Dr Fazlullah Abbasi supported the Implementation Agreement (IA) between SSGC and JJVL. "Badin field has started depleting and its production has declined to 110 mmcfd from 220 mmcfd. British Petroleum has also not submitted any figures to validate the availability of gas reserves in the field," he added.
"We are legally bound to abide by the agreement," he said adding that Sindh High Court had also issued a stay order and therefore he was not in a position to comment more on the issue. Iqbal Z Ahmad representing JJVL said that an amount of $105 million had been invested on LPG extraction plant. He said that gas was depleting from the field as they were now processing 100 mmcfd against 200 mmcfd earlier.
He further said that the company had created 30,000 jobs and providing LPG as fuel to 0.5 million families. He said that out of total Rs 71,310 per ton cost of LPG in November 2010, JJVL paid Rs 17,275 per ton gas price, Rs 25,668 per ton royalty to SSGC and Rs 15,000 per ton sales tax to government. SSGC in its report submitted to the committee said: "The Implementation Agreement (IA) was transparent as all the statutory requirements involved in the bidding process were duly complied with. Additionally the Board of Directors was kept fully involved and informed each step of the way. Also the IA was concluded after protracted and prolonged negotiations; SSGC achieved additional income of Rs 2.8 billion."
"The extension or termination of the implementation Agreement between JJVL and SSGC is contingent upon any extension or termination of the GSA dated 28 November 1988, between British Petroleum Pakistan, OGDCL, Occidental Petroleum Inc and Government holdings as per Article 2 of the Implementation Agreement," the report says. JJVL filed an application before the Lahore High Court against the order of the Competition Commission of Pakistan (CCP) dated 14 December 2009 in the matter of show cause notices issued to Jamshoro Joint Venture Ltd (JJVL) and LPG Association of Pakistan (LPGAP), and obtained a restraining order against the said order by the CCP. The matter is still sub judice before the Court, it said. SSGC hereby reiterates its position that it is legally bound by the decision of the Court, the report adds.