Petroleum Division Clarifies Media Reports On Taking Over Second LNG Terminal

The Petroleum Division (Ministry of Energy) Saturday vehemently denied the news items appeared in the certain section of media regarding taking over second LNG terminal and desires to state the factual position

ISLAMABAD, (UrduPoint / Pakistan Point News - 4th Apr, 2020 ) :The Petroleum Division (Ministry of Energy) Saturday vehemently denied the news items appeared in the certain section of media regarding taking over second LNG terminal and desires to state the factual position.

According to ministry's press note, the statements appearing on 3rd April, 2020 are false and apparently perpetuated by vested interest party(s) to prejudice opinions of the public at large and of the key stakeholders in this matter which is sub-judice in the London Court of International Arbitration ("LCIA").

It is denied, as portrayed in the titles, captions and body of the articles that the Government of Pakistan is an aggressor and is grabbing private parties' assets of the LNG Terminal-2, thereby, the nuance of expropriation is false, misleading and baseless.

The Government encourages investments and provides it fair protection albeit the reported disputes are of commercial nature that are being dealt prudently by the concerned commercial entities in accordance with the agreement and the law.

The report that Petroleum Division has submitted a plan to take-over Terminal -2 assets is denied.

Only a status update was presented to the CCoE for information on the facts of the dispute. It is clarified that PLTL has the contractual right to purchase PGPCL's share of terminal assets, on expiry or earlier termination, in which case certain commercial benefit accrues to the public, or appoint another substitute terminal operator in lieu of PGPCL both under certain breach of conditions, which prevailed.

The options are exercisable by paying full cost of assets or such amount is paid by a substitute operator appointed by PLTL, only upon outcome of judicial and arbitral awards.

The article implies that PGPCL is intimidating with a potential claim of 100s of million Dollars if PLTL takes-over the terminal.

It is clarified that the dispute was initiated by PGPCL and the Government entity PLTL is acting on merits in defense, as per the contract and the law.

It is also realized that impact of the potential damages claim is subject to arbitral award, and is also equally likely on the dispute claimant.

Agreement between PGPCL and PLTL for LNG services at Terminal-2 was terminated by PLTL after being extremely tolerant of the material financial breach of the agreement.

This Division would refrain from commenting on the reported cure of breach by PGPCL nearly two and a half months post-termination of OSA, as this matter is sub-judice.

There are three (3) key project parties other than PGPCL actually involved with the Terminal-2 operations and amongst them having major investments in the project.

PLTL had signed ancillary direct options agreements with the project parties to continue LNG operations unaffected by the dispute with no threat of gas supply disruption.

The action is also aimed to protect the major portion of investment made by the other project parties.

PLTL participated in good faith in a protracted dispute resolution process which remained inconclusive and inequitable to public interest due to inflexibility shown by PGPCL to settle the dispute. PGPCL ended the dispute resolution process prior to its expiry time and took the matter to Islamabad High Court (IHC) to restrain PLTL to take post termination steps as stated in the OSA, as well as to the London Court of International Arbitration (LCIA).

It is clarified that IHC has not issued an injunctive order on termination of the OSA rather only stayed certain post-termination actions while allowing arbitration at LCIA, and court proceedings continue.

It is denied that PLTL has unduly delayed the filing of response to the LCIA. The Company is on top of the affairs and will act accordingly in view of the situation and in the best public interest.

The statement that a Ministry of Petroleum official stated that PLTL terminated the contract, as PGPCL did not pay the LD amount of $ 30 million is baseless and denied, since, persistent breach of a key financial covenant of the OSA led to the termination of the agreement.

There is a separate outstanding dispute of LDs between the two parties arising out of the delayed commercial start date of terminal operations, which was also afforded a fair opportunity of extended dispute resolution process under the OSA, and after being inclusive, PGPCL chose to initiate arbitration at the LCIA, which too would be defended by the Company on merits and in accordance with the law.