ISLAMABAD: Amid acute gas shortages, the government is divided over the proposed $16 billion contract to be signed between two ‘commercial entities’ of Qatar and Pakistan for import of Liquefied Natural Gas (LNG) for 15 years.

“Serious difference among various ministries surfaced during a meeting of the ECC (Economic Coordination Committee) of the Cabinet held on Wednesday,” a cabinet member told Dawn who attended the meeting. “Ministers and serious officials exchanged harsh words over the LNG issue,” he said.

The stage was set by Finance Minister Ishaq Dar who was angry for bringing the proposed LNG Sale and Purchase Agreement before the ECC. He wondered why the ECC was being involved in a commercial transaction. “This is a commercial agreement, PSO and Qatargas should seal it,” he was quoted as having said.

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The finance minister’s position was supported by minister for climate change, managing director of Public Procurement Regulatory Authority, chairman Federal Board of Revenue and secretaries of law and finance.

In Dar’s view, the deal should be signed and settled between Pakistan State Oil and Qatar Gas being independent commercial entities. PSO has an independent board of management empowered to sanction commercial decisions.

Petroleum Minister Shahid Khaqan Abbasi was perturbed over these remarks and got emotional. “Then you better scrap this” because the PSO board would not approve it without ECC’s approval, he said but pleaded that LNG supply contract was on a government-to-government (G-to-G) basis and finalised between companies designated by the governments of Pakistan and Qatar for long-term LNG supply.

The finance minister being the chairman of the committee invited the opinion of former Supreme Court judge and federal law secretary Sardar Raza Khan. The law secretary said it was not a G-to-G agreement and explained that the G-to-G agreement has to be signed by the two governments.

If the agreement is on behalf of the government, then it should be signed by the ministry of petroleum as even the Petroleum Concession Agreements (PCA) signed with petroleum companies for petroleum exploration were signed by the director general of petroleum concessions and secretary petroleum on behalf of the President

Minister for climate change who earlier worked as law minister in the current and Musharraf government also supported view point of the finance minister.

The meeting was informed that Oil and Gas Regulatory Authority (Ogra) had supported a G-to-G deal keeping in view natural gas shortages but had declined to approve the proposed agreement saying it was outside its purview.

The Public Procurement Regulatory Authority (PPRA) managing director said if the agreement was not G-to-G and prima facie it was not, then it was also a violation of the PPRA that required competitive bidding or a formal exemption from PPRA rules.

The FBR chairman said it was imprudent to bring such matters before the ECC because decisions taken at the level of ECC were not subsequently accepted by the Port Qasim authorities and there were problems in implementation also.

He was referring to a request in the LNG summary seeking inclusion in LNG consumer price of port charges over and above $320,000 under the original agreement between PSO and Qatargas which in some cases went beyond $700,000 with the change of ship size.

The participants also had an uneasy debate over creation of new subsidiary companies for LNG import and handling. The secretary finance is reported to have opposed creation of about 10 subsidiary companies proposed by the petroleum ministry, saying such commercial entities should be created independently by the respective ministries.

Water and Power Minister Khwaja Asif who generally remained neutral on LNG agreement opposed creation of LNG-based power generation companies by the petroleum ministry. He, however, said the bureaucrats were not ready to take responsibility and diverting the burden towards politicians.

On the repeated requests of the petroleum minister, the finance minister finally asked the federal secretary Ministry of Law and Justice to formulate a legal opinion on the subject so that next ECC meeting could look into the matter in detail.

Through the proposed agreement, the petroleum ministry was seeking ECC approval to transfer some critical liabilities of Qatar gas to local companies and consumers beyond the original agreements. For example, it entailed 100 per cent “take or pay” liability on Pakistan and 20pc liability on LNG supplier for supply failure or off-specification supplies.

Also, the ministry has reported that under the original sales and purchase agreement (SPA), the Qatar gas was to pay port charges at a minimum of $320,000 but now wanted to use a different LNG carrier whose port charges were on the higher side.

Published in Dawn, November 27th, 2015