Oil and Gas Development Company Limited (OGDCL) may face another legal battle with M/s Ittehad Industries and P I Holding due to cancellation of gas sale contract from dormant gas fields, Business Recorder has learnt.
According to documents available with BR, OGDCL board of directors in its 116th meeting held on June 2010 decided to:
(i) Award contract for sale of gas to M/s Ittehad Industries Islamabad from Nur, Bagla and Jandran gas fields and to M/s P I Holdings Limited from Sara West Field; and (ii) issue conditional Letter of Intent (LoI) subject to approval of DG PC and receipt of performance/bank guarantee from a local scheduled bank equivalent to the projected cost likely to be incurred by OGDCL plus 20 percent as compensation/unforeseen expenditure. At present OGDCL has five dormant fields. Nur field was discovered in 1989, Bagla in 1991, Sara West in 1996, Jandran in 1997 and Kakhro in 1998. Two attempts were made in the past to sell gas from these fields but the absence of competition and the low price offered by bidders led to their failure.
Recently 15 companies purchased the tender documents of which nine companies participated in the bidding process. M/s Ittehad Industries won the contract by offering highest price of Rs 301 per mmbtu for Nur field, Rs 304 per mmbtu for Bagla field and Rs 251 per mmbtu for Jandran field. JJVL was the lowest bidder offering Rs 114 per mmbtu for Nur field and Rs 114 per mmbtu for Bagla field. P I Holding Private Limited won the contract for Sara West by offering highest price of Rs 85 per mmbtu. Formalities have been completed - OGDCL has issued Letter of Intent to these parties and these companies have submitted bank guarantees.
"Sindh government''s demand to purchase gas from the fields has led to cancellation of the contract," sources said accusing it of conspiring against OGDCL which would be forced into litigation. Sindh should have made its wishes known at the time OGDCL advertised sale of gas from these fields. Sources maintained that these gas fields would no longer remain economically feasible after two to three years.
OGDCL offered sale of gas to private parties after Sui Northern Gas Pipeline Limited (SNGPL) and Sui Southern Gas Company (SSGC) refused to accept gas from these fields due to low pressure. "Successful companies had planned to set up power generation plants near the gas fields," sources added.