In a major development, the Board of Directors (BoDs) of Sui Southern Gas Company (SSGC) here on Friday night unanimously rejected the retention of FSRU Sequoia having re-gasification capacity of 780mmcfd, refusing to give a two-year waiver on buyout rights on its old FSRU (Floating Storage Regasification Unit) Exquisite as was demanded by Engro Elengy Terminal Private Limited (EETPL) a day before.
The EETPL wanted to send the FSRU Exquisite to another country after getting a two-year waiver for retention of the bigger FSRU Sequoia in Pakistan. The decision has virtually put the PTI government into a quagmire with mammoth gas shortages in the forthcoming winter season looming as Sequoia, which has an additional capacity of 150mmcfd, will no longer stay in Pakistan after September 11-12.
The Engro Elengy Terminal Private Limited on Thursday sent a letter to the government and SSGC, asking for approval till Friday two-year waiver on buyout rights over the old FSRU if Pakistan wanted to retain the new FSRU Sequoia having additional capacity to re-gasify 780mmcfd. The EETPL also wanted that in case Engro or Excelerate Energy defaults, SSGC will have no buyout rights on Sequoia after it is retained.
All the board members found the proposal unacceptable, saying EETPL wanted the two-year waiver on buyout rights of the gas company over Exquisite and it also desired SSGC to have no rights over Sequoia at least for 1-2 years as the new agreement would take a lot of time. The Board members were of the opinion that in this case, during the time till a new agreement is reached if EE, also the owner of the new FSRU, or EETPL defaults, then SSGC will have no rights to purchase it. Under the existing LSA, Exquisite will be in the agreement but it will be in another country because of a two-year waiver. All the board members were of the view the offer by Engro was simply unacceptable as it will trigger massive risk for the state-owned gas company.
When contacted, Secretary Petroleum Dr Arshad Mehmood confirmed that the SSGC board had rejected the EETPL offer to retain Sequoia. He said that Sequoia will remain here till the old FSRU arrived. And during this time, if EETPL improves the offer acceptable to SSGC, there were still chances of retaining Sequoia. “The Petroleum Division had advised the SSGC management and the Board to take the decision keeping in view the legal position. The SSGC board is independent in its decisions.”
However, official sources said that keeping in view the demand of EETPL, the SSGC BoD meeting was called on Friday and all members unanimously rejected to retain the new FSRU at the cost of surrendering the buyout rights. However, seven directors of the government in the SSGC board had also rejected the proposal to keep Sequoia, showing that the PTI government had failed to even influence or convince its own directors. The majority decision can be managed by 7-5. Some sources said that the Board had rejected the proposal also because of the absence of a green signal from NAB. The Petroleum Division some weeks back had sought the go-ahead from NAB for the utilisation of excess capacity of the new FSRU at the Engro LNG terminal.
Engro officials said that EETPL respects the decision of SSGC BoD and under the existing LSA (LNG Services Agreement), the old FSRU Exquisite will now come back tentatively on September 11-12 and Sequoia will leave on September 11 for Brazil. They said EETP will have to shut down its LNG terminal for at least three days and from the fourth day, partial regasification will start, which will go up to 100 percent on 6th and 7th day. “We will try our best to bring the FSRU Exquisite filled with LNG that went to Qatar on June 28-29 for dry docking to minimise the impact of gas shortage due to the shutdown of terminal.”
The Sui Northern officials say that the shutdown will lead to severe gas crisis as the system will be devoid of 680mmcfd gas from the new FSRU and for three days, there will be a huge shortage for export and non-export industry, fertilizers and CNG sectors and so much so, the domestic sector will also experience gas shortages in various pockets of the country. He said that SSGC currently retains 150mmcfd out of imported RLNG and in the winter season, it will retain an additional 150mmcfd for supply of RLNG to K-Electric in the winter season. And this is how only 900mmcfd gas will come to Punjab and KPK, which will be not enough to cater to the needs of mid and upcountry.