By SKM
February 26, 2025
ISLAMABAD: The board of directors (BoD) of Sui Southern Gas Company Limited on the direction of the Special Investment Facility Council (SIFC) is going to approve the revenue sharing formula agreed between the gas utility and JJVL agreed in the planform of the SIFC for making the (Jamshoro Joint Venture Limited) JJVL LPG-NGL extraction plant operational.
“Secretary Petroleum Mr Momin Agha who is Baku with Prime Minister Shehbaz Sharif may join the office tomorrow (Thursday) and arrange the Board meeting for getting the nod to the agreement reached between SSGC and JJVL at the level of SIFC,” a senior official privy to the development told Exclusivewaves.com.pk.
Earlier in January 2024, the Special Investment Facilitation Council (SIFC) took the notice of closure of the Jamshoro Joint Venture Limited (JJVL) LPG-NGL extraction plant from June 2020 and directed the Petroleum Division to help resolve the disputes between the plant management and Sui Southern authorities. SIFC wanted to use the plant as an import substitution industry against LPG import and save the precious foreign reserves being used for the import of liquid gas.
Since June 2020, till the SIFC took notice of the JJVL plant’s closure in January 2024, the country braved the domestic LPG production loss of over 317,000 tonnes with domestic Natural Gas Liquid production loss of over 127,000 tonnes and more importantly, the government has to face the additional burden of over $193 million because of import of LPG to substitute for JJVL LPG production.
In addition, the official said, the country also faced a loss of export earnings from NGL amounting to over $86 million and this is how the total system loss from the shutdown of JJVL to the economy stayed over Rs94 billion.
“However, the Executive Committee of SIFC which met on January 22, 2025 has decided that JJVL LPG-NGL extraction plant must be made operational without any further delay, given the national objective of maximizing domestic production of LPG,” reveals the minutes of the meeting.
After getting the nod from parties to the dispute, SIFC also asked for an agreement based on revenue sharing at 66:34 ratio (SSGC: JJVL) with 25% LPG share for SSGC based on the OGRA notified producer price. This will ensure Rs2 billion per annum to Sui Southern. The LPG plants would be functional after the lapse of 4 years and 8 months.
“This ratio has been worked out as being well above the ad-hoc / provisional revenue share of 57:43 (SSGC: JJVL) endorsed by the Supreme Court of Pakistan. Revenue sharing of 66:34 (SSGC:JJVL) is based on the actual sales value to SSGC considering actual sales-mix of fertilizer (31%), process (27%) and captive power units (42%) connected to SMSs i.e., FJFC and FFBQL, “Sales Mix.”
Additionally, in the event of price revisions by OGRA or changes in Sales-Mix / consumer categories by the Federal Government, the revenue sharing ratios between the parties will be reviewed and revised accordingly.
It was also decided in the SIFC meeting that the pending undisputed dues, payable to SSGC by JJVL, will be cleared before resumption of gas supply to the Plant. More importantly the FIA inquiry will be concluded on merit, at the earliest and to this effect, the Minister of Petroleum or Petroleum Division will be kept on board.
The minutes of the meeting also show that the Supreme Court of Pakistan approved interim revenue sharing of 57% for SSGC and 43% for JJVL and appointed A.F. Ferguson & Company (“AFFCO”) to determine a final revenue sharing formula, subject to court’s approval. AFFCO determined revenue sharing of 57.54% in favour of SSGC. No product sharing between SSGC and JJVL was provided for in the SCP-approved Agreement. “Non-agreement between both the parties has left the matter inconclusive.”
Working Group meeting held on 21st January 2025, for reaching an arrangement, however, WG noted that still a gap existed between SSGC’s proposed revenue sharing ratio of 78:22 and JJVL’s offer of 64:36, both allocating 25% LPG to SSGC.
SSGC, however, viewed that with the Captive and Industrial Blend it can be further adjusted to 70:30 and in case of disconnection of Gas to CPPs this ratio will become 56:44. The Working Group determined that consensus can be achieved on revenue sharing at 66:34 ratio (SSGC : JJVL), with 25% LPG share for SSGC based on the OGRA-notified producer price. Ends
