Illegal gas sale to unlicensed third party: PEL secures stay order against PD letter from court

ISLAMABAD: M/s Petroleum Exploration (Pvt) Limited (PEL), a private oil and gas sector company has obtained a stay order from the court against a letter issued by the Ministry of Energy, Petroleum Division (PD) for stopping illegal gas sale to an unlicensed third party - a violation of gas sale agreement (GSA) with Sui Southern Gas Company Limited (SSGC), documents available with Business Recorder reveal.

A complaint was filed with the PD that PEL as operator of Ayesha, Ayesha North and Aminah gas fields in Badin South has been selling the gas to third party to its subsidiary- Shehzad Processing Solutions (Pvt) Limited (SPS), an unlicensed company.

PEL is involved in illegally selling the gas resources in the open market since January 2022. This gas theft has resulted in a loss of over Rs4 billion to the national exchequer and the SSGC.

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PEL illegally sold around 600 mmscfd volume of gas to the third party, causing significant loss to SSGC and the national exchequer. This not only violates their contractual obligations with SSGC but also breaches the applicable law and regulations. The public sector distribution company SSGC’s reliance has been increased on the purchase of expensive LNG to meet the gas deficit as a result.

In response to the complaint regarding PEL’s involvement in unlawful gas sale from Badin South, an inquiry committee was also constituted by the competent authority on February 17, 2023 consisting of four members - Director General Petroleum Concessions (DGPC), Director General (Gas), Oil and Gas Regulatory Authority (OGRA), and SSGC.

The inquiry report signed by three members, Director General (Gas), OGRA, and SSGC confirmed gas sale from Badin South to SPS is unlawful and PEL had violated terms of GSA with SSGC that has caused a shortfall in gas supply, forcing SSGC to purchase expensive LNG. The chairman of the inquiry committee did not sign the inquiry report for some unknown reasons.

Subsequently, the inquiry committee was re-constituted by the competent authority on June 22, 2023, consisting of three members - Director Additional Secretary (Admin), PD (chairman), Joint Secretary (D&JV), PD and DG (admin), PD. The inquiry report again confirmed PEL had violated terms of GSA with SSGC, applicable rules and regulations.

Responding to Business Recorder queries, the Petroleum Division stated, “MOE issued a letter to the company to stop gas supply but there is currently a stay order granted by Islamabad High Court on the impugned letter to PEL”.

Spokesman PD further stated the matter is sub judice and in the court currently. “The hearing was fixed for November 8, 2023 but due to non-availability of the judge it was removed from the cause list.”

When contacted, the SSGC’s management replied that SSGC has no idea about the findings of the inquiry committee as they are yet to receive the same. Further, SSGC is not the signatory of the report rather one of the SSGC’s employee was nominated to be part of the committee in his individual capacity.

The findings of the inquiry report strongly recommend implementing stringent measures against the PEL due to its contract violation and emphasize the necessity to recoup the losses suffered by SSGC and the government.

The PEL had a commitment to sell all extracted gas to SSGC as per an agreement approved by the Economic Coordination Committee (ECC). In order to connect the gas field with the distribution pipeline infrastructure, SSGC had invested $4.5 million. PEL has been violating the contract and selling a portion of the gas in the open market with impunity since January 2022.

Copyright Business Recorder, 2023