The Government Needs to Declare Force Majeure Clause

Stakeholders are having a discussion on different levels announce force majeure on liquefied natural gas (NLG) and independent power producers IPPs in accordance with the contracts amid coronavirus outbreak.

As per energy sector experts, LNG contracts with Qatar Gas, Guvnor and others and all the IPPs, contracts with capacity payments were implemented at high rates and brought financial adversity to the country, industry, and the general public.                                                                                                                 

In the opinion of energy sector experts, the COVID-19 outbreak in the country has affected its finances and there are high chances that Pakistan will go bankrupt if the government didn’t take any action to resolve this matter.

The only solution to this problem is to state a force majeure clause in all its agreements with LNG suppliers, LNG Terminal operators and IPP’s.

Furthermore, the experts suggested that the country should take the following steps to protect itself:

  1. Instruct SNGPL to suspend agreement by invoking Force Majeure with unloading facility operators. The basis will be that the country is facing an epidemic and lockdown. The unloading facility operators will inform PSO/PLL that SNGPL has invoked Force Majeure clause and they cannot unload any more cargo from Qatar and other suppliers;
  • Instruct PSO/PLL to suspend agreement by invoking Force Majeure with the LNG suppliers. The basis will be that unloading facilities are under epidemic and lockdown and cannot buy any more gas. WHO and the Sindh government have already issued notifications to this effect; and
  • Instruct Central Power Purchase Agency-Guaranteed (CPPA-G) to suspend agreements by invoking Force Majeure with all IPP’s. Invoking the force majeure will provide an opportunity for the government to revise rates in line with the current world environment.

 The experts estimated, “If this is done, Pakistan can save in one year over US$ 1 billion in LNG and over US$ 2 billion in IPP purchases.”

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Pak Revenue

A reliable source for business, taxation & financial news, covering incentives for CPEC, automobile and performance of stock and mercantile exchanges.

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