Published On: Thu, Sep 1st, 2016

Pakistan wins case against LPG terminal operator in London

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KNPC employees working on the new LPG TRAIN-4 Project at the al-Ahmadi refinery plant complex. PHOTO: AFP

KNPC employees working on the new LPG TRAIN-4 Project at the al-Ahmadi refinery plant complex. PHOTO: AFP

Pakistan has won a case in the permanent court of arbitration in London filed by LPG terminal company Progas with $573 million in damages claims against the government, Petroleum and Natural Resources Minister Shahid Khaqan Abbasi announced on Wednesday.

Progas had set up an LPG terminal in 2004, but it was shut down in 2008. As a result of failure of the business, Progas filed two claims against the Government of Pakistan – one each in Paris and London, holding the country responsible for the loss.

Abbasi said Ali Allawi, the UK-based major shareholder in Progas and brother of a former prime minister of Iraq, filed a damages claim of $70 million and other claims amounting to $503 million were filed by Progas. They invoked the Bilateral Investment Treaty while filing the claims.

He said the petitioners claimed that Pakistan government had interfered in the setting of LPG prices from 2004 to 2008 and that made their business unviable.

In order to recover the money borrowed by Progas, banks auctioned its assets in 2011 and consequently state-owned Sui Southern Gas Company bought the LPG terminal.

According to Abbasi, the current government clubbed the two cases in London and made efforts to pursue and win them.

After three years of hearings, the permanent court of arbitration gave its decision and dismissed the case against the Government of Pakistan.

He revealed that the court also ordered the petitioners to pay $11 million to Pakistan to cover the expenses it incurred during proceedings of the case.

The petitioners would have to pay interest on this amount if they fail to release it in 60 days. The government has spent $18 to $20 million on the case. Abbasi pointed out that former prime minister Shaukat Aziz and former petroleum minister Usman Ameenuddin, who were holding these portfolios during the Pervez Musharraf government, appeared before the London court as witnesses and were also cross-examined. He thanked the two high-ups for appearing before the court.

The petroleum minister claimed that the previous administration of Pakistan Peoples Party did not take interest and make preparation to fight the case. “The previous government did not address the procedural issues,” he said.

Abbasi boasted that the regulation of LPG prices by the government had turned the terminal into a viable entity. The import of LPG through the terminal increased 100% and stood at 0.3 million tons in the past three months. The government has also issued licences for setting up LPG retail outlets.

Responding to a question about the case filed in the international court by a foreign consortium that was working on the Reko Diq copper and gold mining project in Balochistan, he said the government had still the option to go for an out-of-court settlement. However, hearings in the case have been completed.

Pakistan had submitted new evidence which had made its stance strong, he said, admitting that some officials from Quetta had been arrested on corruption charges in connection with the project. The National Accountability Bureau (NAB) is investigating the matter.

Abbasi declared that the government had not made any decision on revision in natural gas prices.

He revealed that the second liquefied natural gas (LNG) terminal would start functioning by the end of June 2017, though the terminal operator had given assurances to the government that it would be ready by the start of June next year. The operator would have to pay a penalty of $150,000 per day in case of delay.

Speaking about the Progas terminal case, Board of Investment Chairman Miftah Ismail said though the Bilateral Investment Treaty had been invoked, the government wrote letters to 11 countries to end the treaty and win the case.

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