SSGC loses case in int’l arbitration court

Will have to pay damages of millions of dollars to Pakistan-US joint venture

ISLAMABAD/ KARACHI: State-owned Sui Southern Gas Company (SSGC) has lost a case in the International Court of Arbitration against Habibullah Coastal Power Company (HCPC) for failure to provide gas for the power plant in line with an agreement, which will inflict damages of millions of dollars on the government, say officials.

Earlier, Pakistan’s government has also lost several cases in the international court.

HCPC is a joint venture between the Habibullah Group (Pakistan) and El Paso Coastal Power Company of the US. The gas sale agreement is due to expire in September 2019.

SSGC is engaged in the transmission and distribution of natural gas to consumers in provinces of Sindh and Balochistan. The government has 73.15% direct and indirect shareholding in the company.

The federal cabinet, in its meeting held on June 5, 1995, considered a summary and approved allocation of 25 million cubic feet of gas per day (mmcfd) for a 140-megawatt combined-cycle independent power plant namely Habibullah Coastal Power Company, Quetta.

According to the breakdown, 21 mmcfd was to be supplied on a firm basis and 4 mmcfd was to be provided on ‘as and when available’ basis. SSGC entered into the gas supply agreement with HCPC on February 28, 1996, which was later amended on March 31, 1996.

Under the agreement, if the seller (SSGC) fails or remains unable to deliver gas in accordance with the agreement, the buyer (HCPC) will utilise its backup supply of alternative fuel for which alternative fuel cost will be paid by the seller.

The alternative fuel in the agreement is defined as distillate fuel oil or fuel oil whereas the alternative fuel cost is defined as the cost differential between gas and the alternative fuel utilised by the buyer.



Until 2004, for failure to supply gas on account of high domestic demand in Quetta during winter months, SSGC either paid the price differential or HCPC waived the price, said officials.

However, HCPC referred the matter of non-supply of gas to the International Chamber of Commerce (ICC), Singapore in January 2007 for dispute resolution in accordance with terms of the agreement.

An ICC tribunal upheld HCPC’s point of view and directed SSGC to pay damages to the power producer. Later, the public gas utility filed an appeal before the High Court in Singapore, but it was turned down.

Differences developed between the two parties in view of the quantum of HCPC’s claim for alternative fuel, damages and interest. Beginning June 2015, HCPC started issuing debt notes for the damages and offsetting the amount from its gas bills.



HCPC again filed a request for arbitration under ICC rules before the International Court of Arbitration in Singapore. The dispute arose after SSGC’s failure to provide the power producer with allocated gas from December 2009 onwards. Case proceedings were concluded in July 2017.

When approached, an SSGC spokesperson pointed out that the public utility was considering seeking a review of the court decision, but acknowledged that chances were not bright.



He dismissed the perception that SSGC had intentionally stopped gas supply to the power company and emphasised that SSGC’s management defended its position vigorously and robustly in the case.

Published in The Express Tribune, August 14^th, 2018.

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