ECC to review cancelled LPG deal

Energy secretary insists any disparity in pricing structure being addressed

ISLAMABAD:

The Economic Coordination Committee (ECC), which is scheduled to meet on Wednesday this week, will take up for review a liquefied petroleum gas (LPG) extraction deal between Jamshoro Joint Venture Limited (JJVL) and Sui Southern Gas Company (SSGC).

It was revealed by Ministry of Energy (Petroleum Division) Secretary Asad Hayauddin while briefing the Senate Standing Committee on Petroleum on Monday.

Hayauddin stressed that LPG was part of the national energy security plan and any disparity in pricing structure for domestic LPG production and LPG imports was being addressed by a special committee, led by the Planning Commission deputy chairman. The Senate Standing Committee on Petroleum directed SSGC to review its decision and restart domestic LPG production in the national interest.

SSGC had stopped natural gas supply to JJVL on June 21, 2020. As a result, about 9,000 tons of LPG and 4,000 tons of natural gas liquids (NGL) disappeared from the market, triggering price volatility and putting an additional burden on the current account deficit with an increase in LPG imports, which would cost an estimated $50 million this year.

“SSGC must review and revisit its decision keeping in mind the full utilisation of national assets and local resources in the national interest,” remarked Senator Mohsin Aziz, Chairman of the Standing Committee on Petroleum. “SSGC is a national flag carrier in the oil and gas sector and has the responsibility to serve consumers.”

JJVL, commissioned in 2005, “has so far provided SSGC with an income of Rs84 billion and a profit of over Rs29 billion without any investment by the public gas utility,” JJVL Director Fasih Ahmed told the committee.

“JJVL meets energy requirement of 750,000 households nationwide and has created 5,000 direct and indirect jobs,” he said. “Over 15 years, it has paid Rs19 billion in taxes, had export earnings of $261 million and helped make $1 billion in foreign exchange savings through import substitution.”

Committee member Senator Taj Afridi underscored the need for restarting LPG production by JJVL in order to improve investment climate in the country and ensure energy security. He pointed out that sales tax stood at 17% on local LPG production and 10% on LPG imports, and asked the Ministry of Energy to provide a level playing field for all investors. LPG Distributors Association Chairman Irfan Khokhar said the decision to restart domestic LPG production would serve national interest and lead to a reduction in consumer prices.

SSGC representatives, who were present in the meeting, argued that it was the government’s decision to halt LPG production in the country since most of the directors on the SSGC board were nominees of the state.

Published in The Express Tribune, August 11^th, 2020.

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