It’s a miracle just how long the National Accountability Bureau was able to drag this one out. But after six long years, the LNG reference against former prime minister Shahid Khaqan Abbasi, Engro Chairman Hussain Dawood, former CEO of Engro Elengy Sheikh Imran ul Haque, and others has finally been withdrawn.
The case is a glaring example of everything that is wrong with Pakistan’s accountability watchdog. On the one hand it became the reason for the imprisonment of Mr Abbasi. But the senseless and unjust incarceration of a former prime minister is everyday news in Pakistan. What makes the case a watershed moment in Pakistan’s legal history is that it saw the imprisonment of a major corporate sector CEO, Sheikh Imran ul Haque, for months without bail on incredibly vague charges that have now finally been dropped.
And it wasn’t just Mr Abbasi and Sheikh Imran that were in the firing line. References were also filed not just against Engro’s octogenarian Chairman Hussain Dawood, but also against Board member Abdul Samad Dawood, and former two-time finance minister Mifath Ismail.
So what in the world led NAB to imprison a former prime minister and the former CEO of Engro Elengy? The facts of the case go back to 2015, when the government of Pakistan awarded contracts for liquefied natural gas (LNG) terminals. The accountability bureau claims government officials, including Mr Abbasi, awarded the LNG Terminal-1 contract through a non-transparent process to Engro.
But as Profit has pointed out in its previous reporting, a combination of NAB documents and public reporting on the matter show while government officials may have made some errors in the processes used to award contracts for the liquefied natural gas (LNG) terminals in 2015, the government has yet to present any evidence of malfeasance or malintent.
To understand the entire story, we go back to 2015.
A timeline of events
Our story actually starts before 2015. In 2006, the government of Pakistan decided that it wanted to incentivize companies to engage in the domestic production of fertiliser. As a sweetener to that fertiliser policy, the government of Pakistan promised to provide 100 million cubic feet per day (mmcfd) of natural gas, the raw material needed to produce urea, which is the most common fertiliser used in Pakistan.
The bidding process for that permit saw two companies win: Engro, and the Fatima Group which would go on to set up Fatima Fertilisers in Pakistan. Engro, being the highly ambitious company that it is, decided to make their plant the biggest investment in a single project in Pakistan by a private sector company: they invested $1.1 billion in capital to set up the largest single-train urea manufacturing facility in the world.
The plant was supposed to begin testing in 2010. But that was exactly the time when Pakistan was hit by a natural gas crisis. The government of Pakistan reneged on its sovereign guarantee to Engro to provide that 100 mmcfd of natural gas for the fertiliser plant that they had just spent $1.1 billion – most of it borrowed – in building. This caused revenue and profitability at Engro to be hit badly as the company struggled to pay off the debts for a project.
(Interesting tidbit: This was during the tenure of Asad Umar as CEO of Engro. Mr Umar was CEO of the company from 2004-2012 and oversaw these losses, which might have contributed to his ouster. Later when the LNG reference would be made, Mr Umar was Pakistan’s finance minister).
Fast losing ground, Engro started contemplating the idea of setting up an LNG import terminal. With their $1.1 billion plant built, if the government was unwilling to provide the gas, Engro would simply import it. What followed was bureaucratic and governmental hell. The Zardari administration of the time was hesitant to grant permissions. So when the Nawaz Sharif administration came in in 2013 with Shahid Khaqan Abbasi as their energy man, it seemed Engro would have the opportunity to finally make their terminal.
Enter Abbasi
It took two years after Shahid Khaqan took over the ministry, but he reached an agreement with Engro. The government finally initiated the process of opening up bids to allow companies to set up LNG import terminals. Engro was among the very first companies to apply and won the bid.
This is where the accountability watchdog begins to have a problem.
Keep in mind that the idea for an LNG terminal was proposed by Engro, essentially shot down by the Zardari administration, and then finally accepted by the next government after Engro advocated heavily for it. It would make sense that the contract would thus be awarded to Engro after a fair bidding process.
But NAB would later make three main allegations about the process:
That the government agreed to pay capacity charges to Engro which would be a burden on the national exchequer, indicating the government gave Engro a deal that was suspiciously sweet.
That Engro was given the contract for Terminal-1 as the result of favouritism on the part of the government, and might have been done in exchange for monetary benefit by Shahid Khaqan Abbasi.
That another undue personal favour was done for Sheikh Imran ul Haque, then CEO of Engro Elengy, when he was offered the position of managing director of Pakistan State Oil which he accepted.
The details of these allegations have been broken down by Profit in a previous story as well.
Read more: Why Sheikh Imranul Haque’s imprisonment should terrify Corporate Pakistan
But to summarise the matter, NAB failed to specify that Abbasi and other former government officials broke government rules in awarding those contracts. The accountability reference also failed to specify exactly how Engro Elengy, or Sheikh Imranul Haque personally, violated the law. There was also seemingly no reason given for why Engro’s Chairman, Hussain Dawood, and their Board Member Abdul Samad Dawood were named in the reference either.
The issue of capacity charges was a moot point in the first place. NAB seems to have had an issue with the concept of capacity charges themselves. The logic behind capacity charges is that they take place in situations where there is a single monopsony buyer who controls the entirety of the market for your product or service and needs you or another entity to build out essential infrastructure for its business. It is a failsafe in these sorts of deals that is relatively standard and not the scandalous point NAB tried (and failed) to present it as.
The bidding process for the project was also pretty standard. It was the same process as the one used to grant contracts for Dasu Dam, which is to say that it was a single-stage, two-envelope process. Both Engro and Pakistan Gas Port Ltd (PGPL) submitted final bids. PGPL’s bid was declared technically non-compliant by an independent, USAID-appointed consultant (the UK-based firm, QED).
The LNG terminal was set up in record time of 330 days, 5 days before the deadline. The past five attempts have failed during three governments at implementing LNG projects since 2006. At the time when arrests were made in 2019, the terminal had saved Pakistan $1.2 billion per year due to reduced import of furnace oil. All in all it seemed a win-win process.
A question of investigative incompetence
Despite all of this, NAB was able to drag out the case for six years. Their smoking gun was that during the time when these deals were taking place from 2013-17, unexplained deposits of Rs1.294 billion were deposited in the bank account of Shahid Khaqan Abbasi, and Rs 1.426 billion were received in the accounts of his son Abdullah Abbasi. There was no apparent link between these deposits and the Engro deal or anything linking the two. But NAB seemed to take causation as correlation.
As part of the process, Mr Abbasi was arrested in 2019. In 2021 he was granted bail by an accountability court that ruled there was never any conflict over non-transparency in the LNG terminal case. The court, in its detailed verdict on the bail, said that the accountability watchdog’s case is not based on whether or not the former petroleum minister took financial benefit.
“There was no conflict over whether or not there was transparency in the LNG terminal case. The authorised forum gave the approval for the LNG terminal,” the court said in its decision.
And while Mr Abbasi was arrested during a time when members of his political party were down on their luck and facing the ire of NAB, Sheikh Imran ul Haque was also arrested in August 2019 and would not get bail in the case until November. Despite NAB’s initial claims that they needed him for interrogation for a couple of weeks, he was in custody for over three months.
The arrest made no sense in the first place. The accusations against Imranul Haque have essentially centered around him striking a good deal with the government. And while it is up for debate whether Shahid Khaqan Abbasi or Imranul Haque had the better end of the bargain, he is currently being punished for doing a good job as a CEO. There was little the interrogators could ask him. His actions as CEO were legal, and again, he has not been charged with anything illegal either, just a lot of conjecture. His appointment as MD of PSO was perfectly legal, and perhaps testament to the job well done that was his deal with the government.
Similarly, Hussain Dawood and Abdul Samad Dawood were also named merely for their association with a company that completed the LNG Terminal project before the deadline and has since made it a very successful project.
The timing equation
There are a lot of lessons to be learnt from this particular case. At the time that the case was filed it was one among many references. NAB accepted two other references along with this at the same time against Shehbaz Sharif and his children.
At the time, the Pakistan Muslim League Nawaz was down on its luck and its leaders were facing charges in a similar fashion to how leaders of the PTI are facing today, albeit in a more heavy handed manner. The case went on for six months, caused damage to the reputation of business professionals and caused political harm to Mr Abbasi in addition to the jail time since it was a blot on his “clean” image.
The exoneration that has just come in has also been made because Sheikh Imran petitioned NAB to reconsider the validity of the reference. Following the request, the accountability watchdog decided to withdraw the reference on merit.
This was clearly the case of a man trying to clear his name and his reputation. In this case, he was successfully able to do so. It is good that the case has been thrown out because otherwise it was setting a dangerous precedent that corporate professionals could face political repercussions for doing business with the government. Remember, these professionals are not used to thinking of jail as a part of their jobs the way politicians do. They cannot wear imprisonment as a badge of honour when they might want to work outside of Pakistan as well. That is why for the sake of the economy if nothing else this precedent would have been unacceptable, and the exoneration is a step in fixing the wrongs of how accountability politics have worked in Pakistan.
What about the other umpteen cases pending since 2019 (year of “accountability”)? Especially non-public office holders who have been persecuted and still facing challenges due to selective justice.