PLL, PSO made excess payments worth $39.5m to LNG suppliers

Two of Pakistan’s state-owned enterprises (SOEs), Pakistan LNG Limited (PLL) and Pakistan State Oil (PSO), made excess payments of $39.5 million to LNG suppliers in the head of port charges, The News reported on Monday.

Payments worth $25 million

“The Pakistan LNG Limited is found to have paid additional payments of $25 million (Rs3.97 billion) to LNG suppliers of Gunvor and ENI and this was disclosed in the board meeting of PLL on October 23, 2020,” one of the board members confided to The News.

Taking serious note of the development, the board of directors sent a letter to Petroleum Division seeking formal inquiry against former acting managing director of PLL, Nadeem Nazir, who is currently posted as MD of Pakistan LNG Terminal Limited (PLTL).

The board also asked for forensic audit of all payments made so far and sought permission to write to LNG suppliers for recovery of the additional amount paid by PLL.

Top official sources told The News that Masood Nabi, recently appointed as MD of PHPL, was given the charge of PLL in September 2020. He informed board of directors about the excessive payments within 48 hours.

Nabi refused to offer any comment on the issue, saying the matter is with the board of directors of PLL. However, sources said the board of directors has written a letter to Petroleum Division about this development seeking an inquiry against the then acting MD of PLL Nadeem Nazir.

PSO paid $14.5 million

The PSO also paid additional payments of $14.5 million (Rs2.3 billion) to Gunvor and other LNG suppliers. This was disclosed in the PSO board of directors meeting, but the company’s top management said in the BoD meeting that it had recovered excess payments of $14.5 million from the LNG suppliers.

However, the PSO BoD recommended strict action against PSO’s LNG department. The PSO has initiated an inquiry against general manager of LNG, two deputy GMs and two commercial officers against the additional payments of $14.5 million. “In next BoD meeting, the result of the inquiry initiated by the PSO management will be placed for further orders.”

Secretary Petroleum Division Mian Asad Hayuaddin confirmed that both the entities, PSO and PLL, have made excess payments, but he exactly does not know how much additional payments were made under the head of port charges which were actually to be paid by LNG suppliers. He said PSO had recovered its additional payments from LNG suppliers. However, the PLL BoD has also highlighted the additional payments made by the company.

The secretary said that forensic audit of the payments made so far would be conducted to assess how much excess amount had been paid. He confirmed that the PLL BoD had asked for a formal probe into excess payments.

Petroleum Division Spokesman Qazi Sajid confirmed that the PSO had paid an additional amount of $14.5 million to LNG suppliers which had been recovered and an inquiry had been ordered against the LNG GM and other officials for extra payments.

Maintaining ‘healthy relations’

However, as per the details obtained from the Petroleum Division, PLL had been paying an additional amount to LNG suppliers since earlier part of 2018 till two and a half months back.

The issue of additional payments came to light in June 2019, sources said. Nazir, who was the CFO of PLL and PLTL at the time, stopped excess payments to LNG suppliers barring Gunvor and ENI, saying PLL wanted to maintain “healthy relations” with both companies.

Top sources said that PLL got the legal opinion from English law firm in early September, 2020, according to which PLL has committed excess payments in violation of contracts signed with Gunvor and ENI. “From end of October, 2020 the new management of PLL has stopped excess payments to Gunvor and ENI.”

What were the additional charges?

Under the contract, PLL is bound to pay Port Qasim Authority the pilotage including towage charges and monsoon charges, but PLL also kept paying those charges since early part of 2018 till middle of October 2020 which were to be paid by LNG suppliers. PLL is found to have paid over and above the contract charges. The said charges were to be paid by LNG suppliers but PLL kept on paying to have “healthy ties”.

The additional charges which PLL kept on paying include additional pilotage charges hiring of tug boats, standby tug services, standby services of pilots for inward and outboard movement of LNG vessels. In addition, berthage and pipeline charges, penalties on excess beams are paid by PLL which are not allowed to be paid under the contract.

The contract says that all such charges are to be paid by LNG suppliers. Sales tax and other taxes are also to be paid by LNG suppliers. The correspondent also sent a questionnaire to the former MD of PLL and current PLTL MD Nadeem Nazir for his detailed version, but he failed to turn up with his version, saying he is in the process of getting clearance from the Petroleum Ministry.

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