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Here Is Why Engro Is Not To Be Blamed In The LNG Corruption Case

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Engro Corporation’s Chairman Hussain Dawood has been summoned by the National Accountability Bureau to give his statement in a case regarding the ‘illegal’ awarding of LNG terminal-1 licence to the Elengy Terminal Pakistan Limited (ETPL).

This is the same case in which former prime minister Shahid Khaqan Abbasi, former petroleum secretary Abid Saeed, and former managing director of Sui Southern Gas Company, amongst others, are under investigation.

NAB’s investigation of corruption cases has frequently come under criticism, with some arguing that the anti-corruption body is doing the bidding of the ruling government while others criticise NAB’s misbehaviour with those under investigation.

An investment analyst, Farooq Tirmizi, took to Twitter to express his resentment over NAB’s decision to summon the chairman of Engro Corporation. In a series of tweets, he explained why the decision to investigate Hussain Dawood was ‘ridiculous’ and how it was wrong to blame Engro in the LNG corruption case.

Farooq explained the current case of the ‘illegal’ award of LNG terminal-1 licence to ETPL, explaining how the then government of PML-N came to the decision and how Engro had won the bid for setting up an LNG terminal in Karachi.

He stated that the government of Pakistan had requested fertiliser companies to set up large manufacturing plants in order to reduce the country’s fertiliser imports. The government, as an incentive, had promised companies a supply of cheap natural gas.

Engro had invested $1.1 billion in setting up the plant but the government went back on its word as gas reserves ran low in 2010. “Only companies who paid bribes received their supply, while ‘law-abiding’ companies like Engro, who refused to pay bribes did not,” he added.

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Farooq further said that Engro spent years begging for the gas and finally told the government to at least let it set up a terminal to import gas from abroad so the investment would not go to waste.

This was followed by an auction process for a licence, which was conducted by the then petroleum minister Shahid Khaqan Abbasi.

According to the investment analyst, Engro won the contract with terms that are considered standard in energy infrastructure.

He said that the current government’s claim that the terms of the contract are ‘unusually favourable’ was not accurate. This was because Engro could not import the gas itself but had to use the Sui Southern Gas Company (SSGC) pipeline system; the company was both the seller through Engro Elengy and the buyer through Engro Fertilizers.

He added that the government-owned SSGC and Sui Northern Gas Pipelines (SNGP) served as intermediaries in the process, and were required to pay capacity charges to Engro Elengy. He added that Engro would pay both SSGC and SNGP for the gas.

Farooq added that the capacity charges seem to be high but were never actually required to be paid save for the early days of the project. He explained, “Capacity charges are standard when you have a monopoly buyer: why would you set up a piece of infrastructure if by law you can only sell to one buyer, unless that buyer promised to cover at least the cost of your installed capacity (hence the term ‘capacity charge’).”

He concluded by arguing that companies like Engro, which were law-abiding and good employers, were the ‘right kind’ of companies. He said that if such a company, which had made the largest private sector investment in Pakistani history, was harassed, nobody would invest in Pakistan. “They do not deserve this treatment,” he concluded.

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