Gunvor – a supplier of LNG – has filed a case against Pakistan State Oil(PSO) in an international court, aggravating the financial risk to Pakistanas this directly impacts the involvement of the state companies in the LNGbusiness, Express Tribune reported on Wednesday.

It was during the tenure of the PML-N-led government that the privatesector and public companies had worked jointly to establish LNG terminalsin Pakistan, and state companies like PSO and Pakistan LNG Limited (PLL)have been involved in the LNG supplies business since then.——————————

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PSO had signed LNG supply contracts with Gunvor and Qatar Petroleum for thesupply of 500 million cubic ft per day (mmcfd) from Qatar for a period of15 years. The two companies had also signed a short-term LNG contract withGunvor for the supply of 100 mmcfd for a period of five years.

Later, the PLL had floated tenders for short term and long-term contractsfor the supply of 100 mmcfd each, and both these tenders had been acquiredby Gunvor, which had raised eyebrows at that time.

Another tender that had been floated by the PLL for a long-term supplycontract had been won by an Italian firm called ‘ENI’ that had quoted thelowest price to win a contract with PSO.

However, despite this, the PSO continued making excessive payments toGunvor on account of port charges for 4.5 years, and it was pointed out bythe PLL management. This led to legal action whereby legal opinion wassought from an international firm that had assisted the Pakistani firms infinalizing the LNG supplies agreement with Gunvor.

After the exposure of the issue, the PSO deducted the excess payments,which led Gunvor to file a case against it in an international court.

PSO had a five-year supply contract with Gunvor that expired in December2020. PLL also has a five-year agreement with Gunvor for the supply of LNGsupply that will expire in December 2021.——————————

Officials said that PSO has a rule to blacklist any company involved inlitigation with it. Now, that Gunvor has filed a case in the internationalcourt, PSO is likely to blacklist it.

Gas utilities in Pakistan are already in a circular debt of over Rs. 78billion due to the absence of a legal framework to recover the cost of theimported gas from domestic consumers.

Not only is this new turn of events likely to exacerbate the LNG situationand the financial trap for Pakistan, but the involvement of the statecompanies in this sector will also lead to higher financial exposure forPakistan on international platforms.