Petroleum Ministry has reportedly decided to oust Managing Director, Sui Northern Gas Pipeline Limited (SNGPL) Arif Hameed, after he refused to get Rs 15 billion loan at purportedly higher rates to procure steel pipes for phase II of LNG pipeline project; well informed sources in the Petroleum Ministry told Business Recorder.
The Ministry had submitted a hurriedly prepared summary to the Economic Co-ordination Committee (ECC) of the Cabinet in its meeting on September 3, 2015 which was withdrawn without citing reasons.
According to the summary available with Business Recorder, Petroleum Ministry argued that in view of persistent demand and supply gap of natural gas in the country, Government as a short term measure, is aggressively pursuing import of Liquefied Natural Gas (LNG) to meet the shortfall in gas supplies.
Accordingly, various LNG import projects aimed at import of a total of 1,200 MMCFD gas are being pursued by this Ministry through state owned enterprises in petroleum sector. The LNG receiving, storage and re-gasification terminals will be developed at Port Qasim and/or Gwadar Port and the gas has to be transported upcountry through high pressure transmission lines. The present pipeline capacity can only handle up to 400 MMCFD gas out of which 280 MMCFD gas can be transported to M/s SNGPL system while 120 MMCFD gas can be consumed in M/s SSGC system. Accordingly, both the gas companies have embarked upon undertaking pipeline infrastructure development plan for upcoming LNG and anticipated indigenous supplies. The project is expected to be completed by December, 2016 subject to timely availability of funds.
The summary further reveals that the infrastructure project of both the gas utilities ie M/s SSGCL and M/s SNGPL comprises of two phases ie phase-I and phase-II. For undertaking phase-I, both the gas utilities have arranged funds from commercial banks, however, phase-II requires funds of Rs 58 billion (SNGPL) and Rs 40 billion (SSGCL) respectively. These companies have requested the Ministry for arranging the funding facility from Gas Infrastructure Development Cess (GIDC) currently being administered by Ministry of Finance as a part of Federal Consolidate Fund.
Keeping in view the request of gas utility companies regarding financing, the matter was taken up with Ministry of Finance in a meeting held on August 05, 2015 chaired by Additional Secretary Finance. In the meeting gas utility companies were informed that Ministry of Finance is ready to provide GoP guarantee in favour of gas utility companies to arrange financing against phase-II project from commercial banks. Meanwhile, M/s SNGPL informed in its letter of August 18, 2015 that the finance committee of their Board of Directors in its meeting held on August 18, 2015 while considering the matter of procurement of steel pipes required for phase-II project valued @ Rs 14 billion, and advised the management not to release Letter of Intent (LoI) for release of order for procurement of the steel pipes till such time the financing facility is arranged for the company at commercially viable rates. SNGPL was required to be place order by August 31 August, 2015. Sensing the urgency of the matter, the Ministry in its letter of August 21, 2015 requested Ministry of Finance to arrange credit facility of Rs 15 billion from financial institutions in favour of M/s SNGPL enabling them to place the order for purchase of steel pipes so as to avoid delay in the completion of phase-II project. Finance Division in its letter of August 31, 2015 agreed in principle to provide GoP guarantee in favour of M/s SNGPL for bank borrowing to the extent of Rs 15 billion subject to approval of the ECC and clearance of term sheet by Finance Division.
Petroleum Ministry did not share the summary with any Ministry except Finance Division, saying "since the matter pertains to Finance Ministry and their in-principle coinsurance in the matter has already been received, therefore, the summary has not been circulated to other Ministries/ Divisions". According to the Rules of Business, it is mandatory for each Ministry to seek comments of concerned stakeholders on the summary. On several occasions, Finance Minister, Senator Ishaq Dar who is also the chairman of the ECC has returned summaries because the concerned Ministry did not get comments of other Ministries.
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