Law Division suggests contract revision with mutual consent

Says text of contracts provides for renegotiations only through this way

ISLAMABAD/ KARACHI: The Law and Justice Division has suggested to the government to renegotiate and take decision on liquefied natural gas (LNG) terminal contracts with mutual consent.

Sources told The Express Tribune that the Law and Justice Division, in its legal opinion, conveyed to the cabinet that the text of contracts provided for their revision only through mutual consent.

It advised the government to explore the possibility of renegotiating the terms of contracts with the two LNG terminal operators in the country. Following legal advice of the Law and Justice Division, the cabinet in its recent meeting directed the Petroleum and Finance Divisions to conduct negotiations with the LNG terminal operators for rationalising the “excessive” rates of return.



The Petroleum Division pointed out that the previous Pakistan Muslim League-Nawaz (PML-N) government had given the highest rate of return on equity to the first terminal operator. Its officials briefed the meeting about the financial details pertaining to equity, rate of return on equity and investment in respect of the two terminals.

Earlier, economic managers in a meeting of the Economic Coordination Committee (ECC) suggested that agreements of LNG terminals should not be revisited as the move could hurt future investments in the energy sector as investors would be reluctant to pour capital into Pakistan.



They noted that the investors were already hesitant to make investment in the country due to a host of reasons. Hence, there was a need to take action in a cautious manner and maintain a friendly environment for the investors to encourage investment in the country. Therefore, they were of the view that revisiting the terms and conditions of the LNG agreement at this point in time might not be advisable.

It was proposed that the matter may be taken up with the relevant parties for revisiting the terms and conditions of the agreement through mutual consent. The ECC noted that the rates of return on equity and investment of both the terminals were high.

Published in The Express Tribune, October 28^th, 2018.

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