KARACHI: Engro Corporation has claimed damages from Sui Northern Gas Pipeline Limited (SNGPL) due to what it says is a breach of sovereign contract by the latter. Engro’s $1.1 billion Enven plant, the largest single train plant in the world, has received 43 days of gas in 2012.
Pakistan’s largest corporate investor says it is suffering heavy losses due to unfair treatment as SNGPL continues to supply gas to other sectors. Engro has decided that with the plant receiving just a month of gas in 2012, the company is claiming Rs28.85 billion in damages on account for shortfall of gas from January 2011 to June 2012.
As per the communication sent to SNGPL, sources say Engro has underlined how SNGPL has failed to fulfil its contractual obligation of providing uninterrupted gas since January 2011 to the Enven plant in spite of a clear Sindh High Court judgment in favour of Engro that directs complete uninterrupted supply of 100 million standard cubic feet per day of gas to the facility.
Furthermore, the claim asks SNGPL to make this payment within seven days or further damages will accrue on a daily basis due to curtailment and continued shutdown beyond June 30.
“The dishonouring by SNGPL of its commitments will destroy a huge investment of over $1.1 billion, hence, discouraging investment in the country,” stated a financial adviser close to the matters. “If they go down they will take the entire banking sector with them which will destroy Pakistan’s economy,” the source added.
Narrating Engro’s ordeal the financial adviser who asked not to be named, said that Engro was chosen by the Government of Pakistan through an international bidding process to set up a fertiliser plant to meet the country’s urea needs and to save precious foreign exchange spent on importing urea. Sources said that if the production capacity of Enven was to be maintained at 1.3 million tons and price remained at 2010 levels, Pakistan can save Rs22 billion in the form of subsidies and Rs43 billion in the form of foreign exchange outflows every year.
Engro mobilised local and foreign lenders and raised $770 million from local and international financial institutions. Engro Enven plant, if run at optimum capacity can add 2,194 tons per day of ammonia and 3,835 tons per day of urea to Engro Fertilizer’s production capacity. It is also the most energy efficient plant of its size and capacity, with the lowest gas consumption per ton of urea in Pakistan.
Published in The Express Tribune, June 27th, 2012.