OGRA Fines SNGPL Rs. 20 Million for Gilgit LPG Plant Delay

The Oil and Gas Regulatory Authority (OGRA) has found the Sui Northern Gas Pipeline Limited (SNGPL) responsible for a two-year delay in the installation of the LPG air mix plant in Gilgit and misleading the Economic Coordination Committee (ECC) about its progress and has fined it Rs. 20 million. It has also told the SNGPL to take action against its executives involved in the delay.

However, in the larger interest of the public, as highlighted by the Federal Government, OGRA has decided to grant the SNGPL an extension of two years, from 28 June 2019 to 26 June 2023, for the construction of the LPG air mix plant in Gilgit. The OGRA said in its decision about the SNGPL’s review petition for an extension in the license granted for the construction of the LPG air mix plant and the distribution of LPG air mix through the pipeline in Gilgit.

The decision available with ProPakistani reveals that the OGRA had observed that the petitioner had been granted a license for the construction of the LPG air mix plant at Mouza Konodass, Gilgit on 28 June 2019, which was valid until 27 June 2021.

The petitioner had not begun construction work within the stipulated period of two years and had requested the OGRA for its extension on 20 May 2021. However, this request was not acceded to by the OGRA vide its decision conveyed to the petitioner on 13 July 2021 based because the project was at its initial stage as per the pictorial evidence submitted by the petitioner despite the fact no-objection certificates (NOCs) had been issued and funds had been approved by the OGRA. The petitioner had also misreported the progress status to the ECC.

The SNGPL had also not submitted any progress reports, which was a violation of its license condition (xix) of the aforesaid license, which requires the licensee to submit a quarterly report. Hence, granting an extension of the construction license was not justified as per Rule 8(2) of LPG Rules, 2001.

Despite the OGRA granting of the required NOCs in 2019 and the approval of funds worth Rs. 454 million, the petitioner did not start construction work at the site until the end of 2020, the decision said.

The ECC had met on 26 March 2020 and was given a false picture that the SNGPL’s air mix plant in Gilgit was near completion at that point, but its Letter of Intent to start civil works had not even been issued in the same month and was awarded by the SNGPL on 27 August 2020.

The petitioner’s lax execution of this project is a violation of the license issued under LPG Rules, 2001, and has far-reaching financial implications on the natural gas consumers, who, by virtue of the Federal Government’s policy guidelines, are paying for the project cost as included in the relevant prescribed price for FY 2019-20 as determined under the Natural Gas Tariff Rules, 2002 and the OGRA (Licensing) Rules, 2002.

Furthermore, the SNGPL had obtained the ECC’s approval through false information of the completion status of the project and has been in violation of the license condition.

Meanwhile, the OGRA had also received a request from the Ministry of Energy (Petroleum Division) dated 27 December 2021 detailing that in order to implement the government’s socio-economic agenda to supply gas to the residents of the remote and hilly region (Gilgit) and to prevent deforestation, the former may facilitate/consider extending the license granted to petitioner for the construction of LPG storage, the construction of the LPG air mix plant and the distribution of LPG through the pipeline in Gilgit.

The OGRA had noted that the petitioner had been unable to provide any strong justifications for completing the project in time and had instead exhibited a neglectful and lethargic approach to executing it. Thus, the petitioner had not satisfied the requirement under Rule 13 of the LPG Rules, 2001 is liable to be penalized under Rule 29 of the LPG Rules, 2001.

The OGRA had considered the ministry’s (Petroleum Division) letter as well as the petitioner’s submission that an amount of Rs. 847 million has already been incurred on the project from the public money by the petitioner, despite the fact that the petitioner had previously claimed an investment of Rs. 268 million in the project so far vide its application for extension dated 20 May 2021.

The OGRA is also cognizant of the petitioner’s failure to complete the project within the initially granted period vide its license and its inability to justify prudent reasons beyond its control, including the aforementioned ones. In consideration of these issues, the OGRA decided to impose a penalty of Rs. 0.5 million on the petitioner under Rule 29 of LPG Rules, 2001.

Furthermore, on account of the petitioner’s non-compliance with Licence Conditions Numbers 2 and 9 read with Rule 20 (xix) of the OGRA (Licensing) Rules, 2002, another penalty of Rs. 19.5 million has been imposed on the petitioner under Rule 28 of the OGRA (Licensing) Rules, 2002 with the directions that the imposed penalty will be borne by the petitioner from its own profits. Also, this amount will neither be passed on to other consumers nor will it be made part of the Annual Revenue Requirements due to the following reasons/violations:

The petitioner had misled the ECC about the status of the project and had slacked the execution of the project despite being granted the NOCs and funds as approved by the OGRA in the RERR for FY 2019-2020. This laxity by the management will result in the escalation cost of the project.

The OGRA has also directed the SNGPL management to take disciplinary action against all the concerned executives on the following grounds:

  1. Undertaking the project despite the regulator having specifically decided not to grant an extension of the license and the same had been conveyed in writing vide letter No. OGRA-LPG-17(799)/19 dated 13 July 2021.
  2. The willful defiance of the OGRA’s directions.
  3. Misleading the ECC and the OGRA about the completion status of the project.
  4. Undue delays that had resulted in the escalation of the cost of the project.



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