Pakistan LNG Withdraws Termination Notice to PGPC

After losing a case in the London Court of International Arbitration (LCIA), Pakistan LNG Limited (PLL) has withdrawn a termination notice for the operation and services agreement (OSA) with Pakistan GasPort Consortium (PGPC), which owns and operates LNG Terminal-2 at Port Qasim.

According to a report published in The News, an arbitral tribunal appointed on April 26, 2023 backed the stance of PGPC during the arbitration between PGPC and PLL, deciding the termination notice issued by PLL on October 14, 2019 was void and illegal. Additionally, the tribunal directed PLL to provide PGPC with a Stand-by Letter of Credit for US$21,481,272, as prescribed in the OSA.

“We have decided not to challenge the LCIA decision and we accepted the verdict, which is why PLL has withdrawn all notices issued to PGPC, including OSA termination notice,” a PLL spokesman told The News. In compliance with the ruling, PLL has withdrawn the termination notice, the Intent notice, the Option Exercise Notice, the Lease Option Exercise Notice, the CPS Option Exercise Notice, and the Novation Notice to PGP Consortium Limited, Fauji Oil Terminal & Distribution Company Limited, BW FRSU II PTE Ltd, BW Fleet Management AS, Port Qasim Authority, and Xinjiang Petroleum Engineering Company Limited.

Pakistan LNG Terminal Limited (PLTL), which later merged with PLL, terminated its agreement with PGPC in 2019 for not depositing a fresh credit rating guarantee of $10 million in cash, or asset value of $15 million. Despite PGPC subsequently depositing the fresh guarantee, PLL maintained its decision to terminate the OSA signed with PGPC, prompting the company to move the LCIA. After several months of proceedings, the LCIA gave the award in favor of PGPC, which set up the LNG terminal at a cost of $176.5 million.

According to the tribunal ruling, PLL was not entitled to terminate its agreement with PGPC to operate the LNG Services Infrastructure (Terminal) at Port Qasim. Its declaration of the 2019 PLL termination notice as void and illegal also voided all subsequent notices issued by PLL to various public authorities and private persons expressing its intent to acquire the terminal. The tribunal also rejected PLL’s claim of $991,546 against PGPC for gas allegedly lost by the terminal.