LAHORE: Sui Northern Gas Pipelines Ltd (SNGPL) faced a major defeat at an international legal forum after its claims of billions of rupees in two different petitions against the state-owned National Power Parks Management Company Ltd (NPPMCL) were rejected by the London Court of International Arbitration (LCIA) this week.

However, the SNGPL terming the NPPMCL’s claims misleading stated that arbitration and awards are private and confidential. According to NPPMCL, which operates two 1,200-megawatt RLNG-based power plants in Punjab, situated in Haveli Bahadur Shah, Jhang and Balloki, Sheikhupura and procures RLNG for power generation from SNGPL, the disputes arose when, in May 2018, the SNGPL raised ‘take or pay’ invoices against NPPMCL and subsequently proceeded to recover Rs10.37 billion from the gas supply deposit maintained by NPPMCL under its Gas Supply Agreements (GSAs).

Orders gas firm to pay back withheld amount with interest

Disputing SNGPL’s claims, the NPPMCL contested the assertions of SNGPL on multiple forums and ultimately submitted the disputes for final resolution to LCIA as per the agreed mechanism under the GSAs.

“The LCIA issued its final awards related to these disputes earlier this week, holding that the documents produced by SNGPL in support of its claims “are little more than self-serving evidence”.

“The LCIA also held that SNGPL wrongly drew down the amount of approximately Rs10.37bn and directed SNGPL to pay the same to NPPMCL with interest from the date of recovery until full payment, which amounts to approximately Rs15.3bn,” the NPPMCL claims while quoting the verdict of the reference.

In addition, the LCIA also dismissed the counterclaims raised by SNGPL against NPPMCL, including an additional claim of Rs4.38bn, and noted that SNGPL had failed to discharge “its burden of proving their quantum.” The final hearing for the LCIA arbitrations initiated by the NPPMCL took place from Sept 20 to Sept 25. The hearing was attended by officials of NPPMCL and SNGPL and witnesses including some power and gas sector experts.

The SNGPL says that there are various misleading reports circulating regarding two arbitration awards involving SNGPL and NPPMCL. “The NPPMCL is a wholly-owned subsidiary of the federal government. The SNGPL will not violate the confidentiality commitment enshrined in the relevant rules; however, it has been constrained to respond given the ongoing speculation. SNGPL intends to fully explore and avail all legal remedies which are available to it and is consulting with its counsels in this regard,” it explains.

It said under the terms of the license granted to SNGPL by the Oil and Gas Regulatory Authority (Ogra) read with the decision of ECC of the cabinet dated May 11, 2018 and in line with the tariff regime in vogue, the company after exhausting all the legal remedies available under the law, will take up the matter with Ogra for determining the impact of the awards on revenue requirement of the Company.

“Since the relevant awards relate to ‘take or pay’ revenues and since these revenues billed to NPPMCL were earlier offered to Ogra as an operating revenue, the reversal of the same, if any, may not have any material adverse impact on the profitability of the company,” the SNGPL said.

Published in Dawn, December 15th, 2021