Three members of Sui Southern Gas Company (SSGC) Board, who opposed approval of $47 million Stand By Letter of Credit (SBLC) in favour of ETPL, had reportedly brought with them dissenting notes, well informed sources told Business Recorder. SSGC Board on Saturday approved a $47 million SBLC for Elengy Terminal Pakistan Limited to cover six months'' capacity charges by a majority vote. Nine board members favoured the proposal while three out rightly rejected it.
"The approval given by the SSGC board to its management for opening a Standby Letter of Credit (SBLC) is a contractual obligation of SSGC to set up an LNG import terminal," said a top government official.
Pakistan has a daily shortage of 2000 million cfd of gas and this terminal is the first successful attempt by the government to set up a terminal. This terminal and the next one planned and being tendered by SSGC will help overcome half the shortage. The unsuccessful attempt by the previous government to set up the terminal last time was at a cost of 85 US cents mmbtu whereas this time the cost is only 60 cents per mmbtu.
According to sources, the three directors who opposed the measure were opposed to this project from its inception and two of them actually voted against the project at the initial stage. The third director had remained the company''s lawyer while remaining on the board, thus raising the specter of a conflict of interest. Under the current management the company is no longer using his law service, sources said. Interestingly, all opposing directors had a written objection prepared before the meeting which they handed in to the company secretary thus suggesting that their minds were already made or that they had come prepared to oppose this measure.
The $47 million SBLC is required to get Elengy (Pvt) Ltd to spend over $150 million to set up the import terminal. SSGC is spending no money of its own on this and is getting over 25km of pipelines free of cost. Much of the pipeline work is already completed, the sources continued.
The sources further stated that the suggestion in some motivated quarters, repeated by one of the dissenting directors at the board meeting, that without PSO''s comfort letter it may cost SSGC $100 million is both untrue and impossible. The fact is that Petroleum Ministry has made PSO responsible for buying LNG and just has made SSGC responsible for transmitting and distributing this gas.
"Both companies are owned by the government and as originally requested by the SSGC board the ministry has issued a comfort letter that tells the company that it shall enter into a mutually acceptable contract with PSO. Hence, the company is not exposed to any unending annual liability. Moreover even if PSO fails to import gas, SSGC itself can import gas and sell it," the sources maintained.
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