SSGCL board appointment raises concerns

SSGC board chairman has been appointed board member of Engro Fertilisers

Zafar Bhutta April 16, 2021


The appointment of Sui Southern Gas Company Limited (SSGCL) board chairman on the board of a company owned by the Engro Group has raised grave concerns.

Shamshad Akhtar, who is currently on the board of SSGC, has also been appointed director on the board of Engro Fertilisers, according to a notice at the Pakistan Stock Exchange.

Some officials are of the view that the move may influence SSGC’s board as it is to take decision on allowing Engro to replace its floating storage and regasification unit (FSRU) to handle LNG import.

Earlier, the Petroleum Division informed the Cabinet Committee on Energy (CCOE) that the existing LNG terminal; Engro Elengy Terminal Ltd (EETPL), is considering enhancing its terminal capacity under the Third Party Access (TPA) arrangement without any financial obligation or risk to the government of Pakistan.

EETPL was planning to replace the existing LNG FSRU to add 150-200mmcfd capacity. Its current capacity is 690mmcfd.

However, EETPL is facing an inquiry from the National Accountability Bureau (NAB) as it was set up during the Pakistan Muslim League-Nawaz (PML-N) government. NAB claims that the government had favoured the group in setting up the LNG terminal.

During the CCOE meeting, the Petroleum Division also said that pursuant to the federal cabinet decision regarding negotiations with LNG terminal owners, it may be put off till finalisation of NAB inquiry in the matter.

It said that NAB investigation had also barred negotiations for any available capacity with EETPL.

The Petroleum Division said that EETPL was unable to proceed with finalisation of GIA while Excelerate, which was the owner of FSRU, was following up with the government to resolve the issue.

The Petroleum Division also said that EETPL was making excessive returns. EETPL had also signed an LNG services agreement. Therefore, EETPL was a client of Engro and therefore the appointment of SSGC board chairman on Engro Fertilisers’ board raised questions of conflict of interest. Sources said that the board of directors was to take up the matter of replacing existing Engro FSRU with the one that was bigger in size and therefore, the move was linked to it.

They further said that SSGC officials had been opposing approval for Engro to replace the FSRU as the company was facing inquiry by NAB.

Gas supply to Engro plant

Currently, a concessionary gas tariff of $0.70 per mmbtu is being availed by Fatima Fertiliser Ltd and Engro Fertilisers. The concessionary period for Fatima Fertiliser is set to expire in July 2021 after completing 10 years from its commercial operation date (COD) whereas Engro Fertilisers’ concessionary period is coming to an end by June 2021.

The government has also announced an end to concessionary gas tariff for Fatima and Engro Fertiliser plants by the middle of current year.

Sources said that Engro desired to extend the gas supply agreement. In this context, the role of SSGCL board chairman would be questionable.

SSGC version

When contacted for comments, SSGC spokesperson said, “We understand that there is no direct conflict of interest (COI) emerging from this appointment, as SSGC does not have business ties with Engro Fertilisers Limited.

Further, on COI, SSGC is complying with local and international best corporate governance practices, requirements/procedures provided in Sections 205 and 207 of the Companies Act 2017, Rule 5 of the Public Sector Companies (Corporate Governance) Rules 2013, Regulation 10 of the Listed Companies (Code of Corporate Governance) Regulations 2019, which provide guidance on identification, disclosure and how to manage actual and potential COI, if such situation arises.”

The official added, “Accordingly, as per the Code of Conduct applicable on members of the board, every director is required to disclose COI on any matter, which is on the agenda of the meeting of the board or any of its committees and recuse himself from the proceedings of the meeting while that matter is being considered.”

Published in The Express Tribune, April 16th, 2021.

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