Musharraf government's flawed deal with JJVL on LPG: SSGC bound to award contract to same party beyond February 2011

Musharraf government's flawed contract with Jamshoro Joint Venture Limited (JJVL) on Liquefied Petroleum Gas (LPG) compels Sui Southern Gas Company (SSGC) to award any extension of contract beyond February 13, 2011 to JJVL on the same terms and conditions, Business Recorder has learnt reliably. The agreement was signed on August 12, 2003 which is still in force.
According to a copy of Gas Purchase Agreement (GPA) signed between JJVL and SSGC, available with Business Recorder, "the agreement shall commence and be effective on the date hereof, and shall, unless terminated earlier in accordance with its terms and conditions continue, in full force and effect until the validity of GSA which is currently valid up to the 3rd February 2011. It is agreed that agreement shall continue on the same terms and conditions for any extension of the GPA beyond 3rd February 2011."
Official sources said that it mars the spirit of competition by binding SSGC to award contract to the same party on the same terms and conditions after its expiry in 2011 without inviting fresh bids. "It shows mala fide intention of Musharraf government which inked such a deal with JJVL which has made SSGC helpless," sources maintained.
"At the time of the deal, LPG business was not as good as it today is and now SSGC should negotiate new terms and conditions with some other competitive investors by inviting bids instead of allowing one party to benefit with respect to royalties and taxes," officials said.
The agreement further reveals that more responsibilities have been placed on SSGC relative to JJVL. The LPG production being a natural resource has the possibility of depletion but the agreement has bound SSGC to pay heavy penalties and fines if it fails to provide average of 160 mmcfd gas to the company (JJVL). Under the agreement, SSGC is bound to pay fines to JJVL as follows: (i) If the average amount of gas made available to the company for processing during a quarter is less than 160 mmcfd, the owner will have to pay $100 per mmcfd shortfall to the company (JJVL); and (ii) In case of a 10 mmcfd shortfall, the compensation payable to the company pursuant to this clause of 7 for such quarter shall be $1000.