MoF ignores IA proposed by GoP with 4 Gas Consortium

Islamabad: The Ministry of Finance (MoF) has turned down a proposal of signing Implementation Agreement (IA) by the government of Pakistan (GoP) with 4 Gas Consortium, a foreign gas supplier, picked up by the Sui Southern Gas Company (SSGC) for its Pakistan Mashal LNG Project (PMLP) for import of liquefied natural gas (LNG).

The ministry in its written response to the proposal said: 'With regard to the proposal regarding signing of implementation agreement by GoP with 4 Gas Consortium, it is stated that since the SSGC will purchase LNG from the consortium they should sign IA and not GoP.'

The finance ministry has, however, shown some flexibility for issuing sovereign guarantee against payment obligations, but it is not ready to give a clean chit to SSGC in this case also. It said the finance ministry agrees to the proposal of issuing a sovereign guarantee against SSGC's payment obligation in PMLP case subject to the condition that it hypothecates assets in favour of the government to cover the risk of its default at any point in time in the future. The Sui Southern Gas Company had requested the government of Pakistan for issuing sovereign guarantee to secure an agreement with 4 Gas Consortium for supply of LNG.

The finance ministry's written response indicated that the matter was discussed threadbare taking into account pros and cons of issuing the sovereign guarantee for PMLP. The ministry said: 'It was ready to issue sovereign guarantee subject to hypothecation of asset by the company in favour of the government to cover its default risk.'

The finance ministry's letter said: 'The undersigned is directed to refer to the proposal under which the draft summary for the ECC has been forwarded on the Pakistan Mashal LNG Project (PMLP). It's stated that the proposal contained in the summary has been considered by the finance ministry.'

The Pakistan Mashal LNG Project is not having smooth sailing. It has been deferred by ECC due to some objections raised by the Port Qasim Authority (PQA). The Sui Southern Gas Company is, however, making every possible effort to get it cleared from ECC.