SSGC stops LNG transmission for fertiliser manufacturer

Asks company to pay the higher fee notified by the regulator

Zafar Bhutta October 14, 2017

ISLAMABAD: Higher tolling charges for handling liquefied natural gas (LNG) imports have sparked a dispute between the Fatima Group and Sui Southern Gas Company (SSGC) as the state gas utility is not willing to transmit imported gas until outstanding payments are settled by the fertiliser manufacturer.

The dispute surfaced in a meeting held last month where the Fatima Group complained that their issues with Sui gas companies pertaining to LNG imports and their handling fee had not yet been resolved and they required an amicable solution.

Responding to that, the managing director of SSGC argued that Fatima Fertilizer - a company of the Fatima Group - fell in Sui Northern Gas Pipelines Limited (SNGPL)'s jurisdiction and it would handle the LNG cargo arranged by the fertiliser company.

Regarding LNG re-gasification charges, he said SSGC had already paid the terminal charges approved and notified by the Oil and Gas Regulatory Authority (Ogra) to Elengy Terminal Pakistan Limited (ETPL), which receives and re-gasifies LNG at its terminal at Port Qasim.

He emphasised that until outstanding payments of around Rs2 billion including Rs1.3 billion in actual fee and Rs667 million in late payment surcharge were settled, SSGC would not be in a position to transport gas for Fatima Fertilizer.

A representative of the Fatima Group countered that SSGC had unilaterally built up the outstanding amount and the late payment surcharge with which the group did not agree.

He said they had paid $0.66 per million British thermal units (mmbtu) in re-gasification fee, but after a revised Ogra notification, SSGC charged them an extra amount at the rate of $1.43 per mmbtu. "This is not acceptable," he said.

He stressed that the Fatima Group was ready to pay Rs978 million based on the old fee of $0.66 per mmbtu.

However, the SSGC managing director said the Fatima Group needed to pay the Ogra-notified fee.

During the meeting, it was asked whether some term sheet or agreement was signed by SSGC and Fatima Fertilizer before processing LNG imports.

The SSGC MD replied that it was initially apprehended that SNGPL would be forced to bear the re-gasification charges, but there was no agreement in place. He said SSGC was a public sector company and it could not move along with huge outstanding bills.

The MD said they had paid terminal charges as per actual ETPL fee and the same need to be paid by the Fatima Group.

It was suggested during the meeting that past issues should not affect future projects and a standby letter of credit could be obtained from Fatima Fertilizer to cover future re-gasification charges.

However, the SSGC managing director said they could not proceed further unless pending fee was cleared by the Fatima Group.

Responding to the request for comments, an SSGC spokesperson agreed that there was a dispute over payment of re-gasification charges as the Fatima Group paid $0.66 per mmbtu whereas they had to pay actual charges as notified by Ogra.

"SSGC management is in contact with the Fatima Group and the Ministry of Energy (Petroleum Division) is also playing a role to resolve the issue. SSGC will transmit their future cargoes once they come up with a concrete payment plan and provide security (standby letter of credit) for future cargoes," the spokesperson said.

The Fatima Group did not respond to the request for comments.

Published in The Express Tribune, October 14th, 2017.

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