Profile: The JJVL story – I

How one LPG project pitted the owner against everyone else.

KARACHI:

On September 12, 2001, a day after the attack on the World Trade Centre, the Sui Southern Gas Company (SSGC) waited for bids for a multi-million-dollar project to extract liquefied petroleum gas (LPG) from its pipelines. Six parties were expected to show up but only one did. That was Iqbal Zafaruddin Ahmed’s Associated Group.

The result was the Jamshoro Joint Venture Limited (JJVL), a project that has made Iqbal more enemies than friends despite his cajoling ways and unmatchable skill to convince others.

The $105-million extraction plant, which started production in 2005, was struck down by the Supreme Court of Pakistan on December 4, 2013, after three judges including former Chief Justice of Pakistan Iftikhar Muhammad Chaudhry found irregularities in the way the contract was awarded.

Associated Group filed a review petition. People who have worked and competed with Iqbal over the years say that this is, by far, the greatest challenge the Lahore-based businessman has faced. Yet, a person who was with Iqbal when the judgement was announced says there were no worry on his face.

The bid

The 9/11 incident took away whatever little interest there was in the project initially capped at a maximum investment of $36 million. The markets were in turmoil and it was becoming clear Pakistan would be the centre of the storm if terrorism’s epicentre was in neighbouring Afghanistan. Convincing lenders to fund the project won’t be easy.

The project was already too risky.

LPG is a mix of propane and butane. This hydrocarbon is either produced at oil refineries or extracted from petroleum fields.

Since 1988, SSGC had received gas from Badin field, which was operated by British Petroleum. There were enough LPG components to produce 400 tons a day but no guarantee for how long the gas would continue to flow. During all those years, when LPG was not extracted, it was burned.



But Iqbal persisted. He submitted the bid even without a $100,000 bid bond, a vital tender condition. The bond was submitted a day later. No one really took notice of this at the time but this discrepancy would come to haunt Iqbal 12 years later.

Nevertheless, he won the LPG extraction project and built JJVL along with his foreign partners, who had a 48% stake, becoming the single largest producer of the fuel in Pakistan

The rise

Over the years, Iqbal has been accused of cornering the market. In the business circles, he is known as the wheeler-dealer who is not to be messed with. He gave LPG allocations from JJVL to friends and family, which included politicians and bureaucrats, furthering his influence.

His stature rose from just another businessman to a key person to approach when it comes to energy projects. From LPG, he moved on to set up rental power plant.

When it became apparent that Pakistan was in dire need of gas, he floated the idea of a floating terminal to import liquefied natural (LNG). The then president Pervez Musharraf came himself to ‘inaugurate’ the project, which never saw the day of light.

Iqbal, 67, ventured into the LPG business in 1989, when he bought Lub Gas, a LPG marketing firm. By the time he bid for the extraction project, he had already built a network of country-wide distributors.

“So what if I gave LPG allocation to my friends? Obviously I would do business with people I trust,” Iqbal told The Express Tribune at his office in Lahore. “No one is appreciating the fact that we created a market. From just six companies in late 80s, there are now 90 marketing companies.”

LPG has a minuscule 1% share in Pakistan’s energy mix. Yet, that share has been fiercely fought for by local and multinational companies.

The fuel is used in places where piped gas is unavailable and by commercial vehicles like rickshaws. On the streets, it is sold through illegal process called decanting where gas is transferred from a large cylinder to smaller ones.

Background

Contrary to what he insists, Iqbal didn’t have a successful business career until JJVL. He has tried luck with manufacturing televisions and tractors without major success.

“I started business with my father in 1960s. We were making televisions under licence from NEC Corporation. But the company decided to move into computers and we had no choice but to shut down operation,” he recalled.

In the early 1980s, he set up one of the largest tractor-building plants in collaboration with a Yugoslavian company. “None other than General Ziaul Haq had come himself to inaugurate it. But after war broke out there, the United Nations imposed sanctions on dealing with that country and we couldn’t do anything about it.”

Iqbal does not hesitate in associating himself with politicians or army generals. “Yes, General Musharaf is a friend. But I don’t think you only need political connections to progress in business.”

Aitzaz Ahsan, the Supreme Court lawyer, and a prominent leader of Pakistan People’s Party (PPP), is one of his closest friends. Iqbal also allotted few tons of LPG to Ahsan who is also defending JJVL in the case.

“The companies, which are receiving gas from JJVL have invested millions of dollars on plants, cylinders and other facilities,” he says.

One of Iqbal’s key foreign partners in energy projects is David Walters, the US Democratic politician and former governor of Oklahoma. Iqbal didn’t share details about the foreign investors in JJVL.

With start of JJVL’s production, the LPG war began. For next few years, this fuel would be most discussed, debated and fought for.

Published in The Express Tribune, January 13^th, 2014.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.