Annual maintenance: Engro wins injunction against gas supply suspension

SHC issues notice to AG, AG Sindh.

KARACHI:

The Sindh High Court issued a stay order on Tuesday preventing Engro Fertiliser Ltd’s gas supply from being cut off.

On April 12, Engro was informed in a letter that its gas supply would be disconnected as the gas fields in Sindh were scheduled to undergo annual maintenance. This, Engro’s lawyer Barrister Makhdoom Ali Khan, argued in court on Tuesday, would cause a colossal loss to the company, which is the largest fertiliser producer.

The company filed a constitutional petition against the secretary of the ministry of petroleum and natural resources, the secretary of Industries and Production and Sui Northern Gas Pipelines (SNGPL) Ltd and the managing director of Qadirpur Gas Fields. It impugned the April 12 letter.

Barrister Makhdoom Ali Khan contended that Engro had set up a plant by investing a huge amount of foreign exchange and by raising loans and funds on the basis of the “sovereign guarantee” extended by the Government of Pakistan in terms of the gas sales and purchase agreement signed on April 11, 2007.

The government and its agencies (gas supply) were under contractual obligation to supply the stated quantity of gas which was vital for the plant to work as it was a fuel and also a raw material for the production of fertilizer, he argued.

Referring to the terms of contract, the counsel said that the gas supply cannot be disconnected unless it falls below 100MMCFD. The contract is for a period of 20 years and the supply cannot be cut off for more than 480 hours or 20 days a year. Barrister Makhdoom Ali Khan showed the court a table that showed that during the current year the supply of gas was disconnected for more than 80 days. This exceeded the maximum period, 20-day period, stipulated in the contract.

If the gas supply is disconnected, Engro would suffer a colossal loss and foreign investors would be scared off, the counsel submitted.

He prayed the court to declare that Engro was entitled to seek an enforcement of the sovereign guarantee committed by the Government of Pakistan in letter and spirit.

The division bench of Chief Justice Mushir Alam and Justice Syed Hasan Azhar Rizvi issued the stay order and directed the respondents to ensure that the maximum amount of gas is supplied according to the contract the petitioner and the government.

The bench ordered pre-admission notices to be issued to the Attorney General Pakistan, Deputy Attorney General (DAG) and Advocate General Sindh for a date to be fixed later by the office of the court.

Published in The Express Tribune, April 27^th, 2011.