Pakistan to file for damages on default by Eni, Gunvor

Pakistan is mulling to approach London Court of International Arbitration (LCIA) to claim damages from the Italy-based Eni and Swiss Gunvor for their failure to meet their contractual obligations, depriving the country of essential fuel supplies.

According to sources, Pakistan LNG Limited (PLL) has placed Request for Arbitration (RFA) before the petroleum division on March 29, 2022 for appointment of legal counsel for arbitrational proceeding in the LCIA. And, petroleum division has approved allocation of British pounds ten thousand (GBP 10,000) to PLL for making payment to LCIA in respect of Arbitration No 225405.

Sources said that Eni has so far failed to supply five LNG cargoes while Gunvor failed to prove seven LNG cargoes to the country and now Pakistan is all set to approach the London Court of International Arbitration (LCIA) for collection of approximately Rs 48 billion worth damages from Eni and Gunvor over their failure in meeting the contractual obligations.

Pakistan will claim collection of minimum Rs4 billion damage for each LNG cargo and in this way approximately Rs20 billion worth damage collection from Eni and Rs28 billion damages from the Gunvor in the LCIA, said sources.

They added that this would be in addition to the 30 per cent penalty on every default shipment since November 2021.

“Pakistan has faced billion rupees worth economic loss as the country has to utilize expansive fuel for power generation purposes in the absence of LNG supply from both Eni and Gunvor”, said the sources.

Sharing details of LNG supply failure by both Eni and Gunvor, sources said that the Eni for the first time partially defaulted in January 2021 when it provided half LNG cargo and then it failed to provide cargo in August 2021. It also committed default in November 2021 and now it has committed the latest default for March.

Similarly, Gunvor also defaulted in November 2021 and now in March 2022 too. However, it sought force majeure every time to avoid the penalty.

Sources also said that the latest default by both companies (Eni & Gunvor) has forced Pakistan to procure LNG from the spot market at a high price of $25.12 per Million British Thermal Unit (MMBTU). And, Pakistan, in response to the emergency, had issued tender on February 17 for two LNG cargoes, one for March 2 to 3 and the other one for March 10 to 11 and resultantly Pakistan got two bids for spot LNG cargoes for only one-time window of March 10 to 11. However, it (Pakistan) got zero response from the LNG trading companies for providing a spot cargo for the window of March 2 to 3.

As per sources, the shortage caused by the defaults has been taking its toll on the country’s resources as Pakistan opted for the expensive diesel to generate power.

They added that in January, Pakistan’s diesel-based power generation surged to the highest in seven years, whereas the LNG-fired output dropped to the lowest in two years. Similarly, the furnace oil (FO) sales grew 14 per cent and high-speed diesel (HSD) sales surged 10 per cent in the eight months of FY22 (July-February 2021/22), amid LNG shortage and higher electricity generation.

Ahmad Ahmadani
Ahmad Ahmadani
The author is a an investigative journalist at Profit. He can be reached at [email protected].

1 COMMENT

  1. Ahmad Ahmadani is not only a highly professional journalist he is also a very kind person.I am sure his investigational news and reports will place him at a remarkable place in the history of investigative jouranlism.

Comments are closed.

Must Read

SCCI calls for joint initiatives to improve Pak-Iran trade

PESHAWAR: President Sarhad Chamber of Commerce and Industry, Fazal Moqeem Khan called for cementing bilateral trade and economic relations between Pakistan and Iran, said...