LPG body warns of looming shortage in Pakistan

Writes letter to petroleum secretary, requesting meeting to resolve issue

Pakistan LPG Marketers Association has warned of imminent shortage of liquefied petroleum gas (LPG) in the country following discontinuation of an agreement between Sui Southern Gas Company (SSGC) and Jamshoro Joint Venture Limited (JJVL).

“We have noted with great concern that production has been shut down at JJVL. Many of our member LPG marketing companies were receiving LPG from JJVL. This will disturb the entire supply chain and create gaps and shortages,” the association said in a letter sent to Petroleum Secretary Mian Asad Hayauddin.

It requested that a meeting should be scheduled at the earliest so that measures to avert the looming crisis could be discussed and taken. JJVL produced 300 to 500 metric tons of LPG per day. Following the discontinuation of the agreement, LPG prices increased by Rs10 per kg.

The price of domestic LPG cylinder of 11.8 kg has gone up by Rs120 while the price of commercial cylinder has jumped by Rs450.

LPG accounts for about 1.2% of the total primary energy supply in the country. This low share of LPG in the total energy mix is due to supply constraints. Annual LPG consumption is estimated at 1.06 million metric tons.

Industry sources caution that pressure would build on foreign exchange reserves of the country due to increased import of LPG in coming weeks and months. SSGC does not have any arrangement to either get the available gas processed at any other plant or set up its own plant.

During 17 months of the agreement (January 2019 to May 2020), SSGC received a revenue of over Rs5.762 billion, earned around Rs600 million and saved a similar amount in unaccounted-for-gas (UFG) losses. The Supreme Court had ruled that LPG supply to a large number of consumers was a matter of public interest, impacting their lives, and LPG supply should continue unabated.

“The agreement between SSGC and JJVL, in pursuance of the Supreme Court decision, was for 18 months only and expired automatically, irrespective of the final determination,” said an SSGC spokesperson. “The final determination, pursuant to Article 5 ‘Determination Report and Order’, of the agreement between SSGC and JJVL, which was validated by the Supreme Court, is a standalone activity to be conducted by the deemed receivers and supervisors of the project namely AF Ferguson & Co (AFFCO).”

The spokesperson added, “JJVL has not provided data to AFFCO, which has been confirmed to SSGC by AFFCO, thus the latter cannot do the final determination unless data is provided by both the parties.

“Data will be provided to AFFCO simultaneously along with JJVL, and SSGC has written to this effect to AFFCO. All the documents, working sheets and other relevant material have been prepared and will be submitted to AFFCO when confirmed that JJVL is also providing it. Once this activity is completed, the same would be put before the Supreme Court for its approval.

“For the sake of record and clarity, SSGC never made any commitment to the Supreme Court for an alternative arrangement. However, the court ordered that the termination of MOUs is valid and SSGC is on its own to make its own arrangement.

“Recently, the SSGC used the services of an international consultant in order to conduct studies on the way forward, who advised SSGC that since the gas is now lean, it can be injected into its system to cater for its customers within SSGC’s franchise areas.”

Published in The Express Tribune, June 25^th, 2020.

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