The involvement of state companies in the liquefied natural gas (LNG) business has exposed financial risk to Pakistan as Gunvor – a supplier of the LNG – has filed a case against the Pakistan State Oil (PSO) in an international court.
The PML-N government had involved the private sector in setting up LNG terminals in Pakistan. But it involved state companies like the PSO and the Pakistan LNG Limited (PLL) in the LNG supplies business.
A legal opinion was sought from an international firm that had assisted the Pakistani firms in finalizing the LNG supplies agreement with Gunvor.
The PLL again reached out to Gunvor on August 10, 2020 with a view to resolve this issue.
After the PLL management had identified excess payments Gunvor was receiving, the PSO deducted the excess payment. Subsequently, Gunvor filed a case against the PSO in an international court.
PSO had a supply contract for five years with Gunvor that expired in December 2020.
The PLL has also a five-year agreement with Gunvor for the LNG supply that would expire in December 2021.
Officials said the PSO had a rule to blacklist any company that is involved in litigation with it.
Now, Gunvor has filed a case in the international court and the PSO is likely to blacklist this firm.
The present government has also allowed the private sector to sell, market and import LNG for its use.
The gas utilities are in a trap of over Rs78 billion due to absence of a legal framework in place to recover cost of imported gas from domestic consumers.
Now, consumers use the LNG but the state company PSO is facing a legal battle in an international court.