BP Pakistan and SSGCL extend GSA for six months

British Petroleum (BP) Pakistan and Sui Southern Gas Company Limited (SSGCL) have extended the Gas Sales Agreement (GSA) for another six months effective February 3, 2011 resulting in extension of implementation agreement regarding LPG extraction plant between SSGCL and Jamshoro Joint Venture Limited (JJVL).
"It would be relevant to point out that M/s BP Pakistan and M/s SSGCL have extended the GSA for another six months wef February 3, 2011 and the Sindh High Court vide its order dated February 1, 2011 has, for the time being, restrained the parties from termination of the implementation Agreement (IA)," the Ministry of Petroleum said in a statement submitted to National Assembly Standing Committee on Petroleum and Natural Resources held on Wednesday.
The Standing Committee on Petroleum and Natural Resources held on February 02, 2011 in the Parliament House deliberated upon the issue of automatic renewal of Implementation Agreement in connection with extension/renewal of ex-Badin field Gas Sales Agreement (GSA) beyond 03.02.2011 executed between M/s SSGCL & M/s BP Pakistan. While summing up the meeting, the Committee directed Ministry of Petroleum and Natural Resources to come up with legal opinion on automatic extension of Gas Sales Agreement (GSA) and Implementation Agreement (IA).
Ministry of Petroleum said that it would be relevant to peruse the article 2 of IA which reads as under: "the Implementation Agreement shall commence and be effective on the date hereof and shall, unless terminated earlier in accordance with its terms continue in full force and effect until the validity of GSA which is currently valid upto the 3rd of February 2011. It is agreed that the agreement shall continue on the same terms and conditions for any extension of the GSA beyond 3rd February, 2011".
According to Petroleum Ministry reply, the perusal of the above provision would lead to draw two conclusions ie (i) the IA shall remain in full force and effect till the validity of GSA ie 3rd February 2011 unless terminated earlier in accordance with its terms (ii) If the GSA is extended beyond 31st February 2011 then the IA shall continue on the same terms and conditions. Meaning thereby that IA is dependent on GSA and its terms and conditions cannot be varied in case of extension of GSA beyond 3rd February 2011.
Since the Implementation Agreement (IA) is dependent, as aforesaid, on the Gas Sales Agreement (GSA) it would be relevant to pursue the provisions of Article 17.1 of GSA which reads as:- "The term of this Agreement shall be for a period of ten (10,) years and shall be extended/or an additional period of five (5) years if the parties mutually agree to do so;
According to these provisions the term of the agreement can be extended only by mutual consent of the parties. However certain terms of GSA were amended through a letter dated July 4, 2001. The condition No 1 of the letter agreement provides that "in accordance with the Article 4 of HOA, the term of the GSA/ HOA shall stand extended until 3rd February, 2011.
Perusal of the quoted provisions would transpire that on expiry of the agreement in question it would not extend automatically. It can be extended only through the mutual consent of the parties and none of the parties is bound to consent for the extension of agreement. And in case the parties do not agree to extend GSA then the IA being dependent on GSA would accordingly lose its effect, post facto. In case the parties extend the GSA then the IA being contingent/dependent upon GSA would be extended for the same term and on the same terms & conditions.
It was also informed that Ministry of Petroleum (MoP) had issued No Objection Certificate (NOC) to Sui Southern Gas Company Limited (SSGCL) to re-tender the multibillion dollars Mashal LNG import project. Pursuant to judgement of Supreme Court of Pakistan, SSGCL have been advised to re-initiate the Pakistan Mashal LNG Project. In addition SSGCL is also working on floating LNG terminal project. The Private sector parties under LNG Policy 2006 can also initiate LNG import projects at their own risk.