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ISLAMABAD: Describing the Tripartite Agreement (TPA), an interim arrangement for the supply of RLNG, as a breach of the directives of federal government, the Fauji Kabirwala Power Company Limited (FKPCL) has sought an uninterrupted and firm supply of gas under the Implementation Agreement (IA), sources in the PPIB told Business Recorder.

Secretary of FKPCL Brig Tariq Javed (retired) in a letter to the managing director of PPIB explained the case and proposed future course of action with respect to supply of gas to the power plant.

The FKPCL is an Independent Power Producer (IPP) under the Power Policy 1994, with an installed capacity of 157 MW in the combined cycle steam turbine mode located near Kabirwala, in Khanewal district. The power plant consumes the low BTU gas commingled with pipeline quality gas, in certain ratios.

The project achieved the Financial Close on June 2, 1996 and Commercial Operations Date on October 21, 1999.

Term of the PPA and IA is for 30 years from the COD, whereas the term of the GSA was 15 years from the COD and there was an inherent mismatch of duration between the contract documents due to the non-commitment of availability and supply of gas by the gas producer and gas supplier.

The term of the GSA (upon extension by the ECC) has expired since March 31, 2015 and it has been replaced with Tripartite Agreement (TPA) which is a stop gap/ interim arrangement between the company, the gas suppliers and power purchaser till the time gas supply agreement is executed for the remainder of the term of the PPA. The GoP through the TPA has allocated RLNG on "as and when" available basis.

According to the power firm, between years 2000, 2006 and 2015 from time to time, the ECC/ GoP and its entities have been deliberating and allocating additional supplies of gas from the alternate sources like Bahu gas field, Qadirpur gas field, as well as, pipeline quality gas for the project to maintain prescribed heating/ calorific value to ensure guaranteed efficiency.

Several MoUs with limited duration of one year were signed between the Company and the OGDCL for allocation of low BTU gas from its gas fields but no long-term/ sustainable solution seems to materialize in form of gas allocation or extended GSA.

The company has claimed that it was also recommended by the Power Division/ GoP that the GSA should be extended for another term of fifteen years so as to match with and commensurate with the term of PPA; however, to no avail.

The ECC, in its decision of July 23, 2014 did allocate low BTU gas from the gas fields of the OGDCL and pipeline quality gas from the SNGPL network for the remaining term of the PPA with a direction to execute the GSA on the said terms of allocation and subsequently the ECC again on January 23, 2015 directed full supply of gas on firm basis and extension of GSA but it was seemingly not or partially implemented and somehow the company was reallocated RLNG.

The power company noted that gas supply failure meaning the non-availability of low BTU has from the gas fields and or pipeline quality gas in the requisite amounts for the operation and dispatch of the complex is a Pakistan political force majeure event under the IA and PPA. Pursuant to clause F (3) of the Power Policy 1994, in case the fuel is to be supplied by a public sector organization, the performance of the fuel supplier will be guaranteed by the GoP under the terms of Fuel Supply Agreement (FSA).

Company Secretary, in his letter also claimed that it is further acknowledged and agreed by the parties the term of the GSA in case of gas supply failure which commences when the complex is unable to operate at the required availability due to non-availability of gas in the requisite amounts under the GSA as a result of reserve failure (depletion of the Nandpur field and the Panjpir field) and or nationwide shortage of supply of pipeline quantity gas.

He has further claimed that the parties have agreed to identify for alternate or additional supplies of low-BTU gas from future reserves that are developed by the gas supplier or by another federal entity in the area of the Complex or secure additional supplies of pipeline quantity gas or combination of both.

According to the power firm, TPA being an interim arrangement for the supply of RLNG, is void for uncertainty and concluded in breach of the directions of GoP for firm allocation on take or pay basis, does not fulfil the obligations required of the GoP under the IA to provide for requisite amounts of gas or to effect gas supply change and it further unilaterally changes a gas supply failure being a Pakistan political Force Majeure Event (FME) under the IA and the PPA to the Other Force Majeure Event (OFME).

Relying on the provisions of the IA, the Company has invoked the relevant applicable provisions of the IA to ensure uninterrupted firm supply of gas in the requisite amounts at commercially reasonable terms for the dispatch and operation of the power plant.

The company has requested PPIB/ GoP to convene the meeting of experts for deliberation on the gas supply change under the applicable terms of the IA read with the PPA.

Copyright Business Recorder, 2022

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