SNG Project

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Sui Northern Gas Pipelines Ltd

INTRODUCTION

DISCOVERY:

The nature gas was discovered in 1952 at Sui in Baluchistan. The gas

transmission is started in 1954.

ESTABLISHMENT OF SNGPL:

Sui northern gas pipelines limited (SNGPL) is the largest integrated gas

company in the country established in 1963 as a gas transmission and distribution

company. The company has expanded its activities to include construction and

operation of pipelines, both for itself and other organization as well as marketing of

LPG.

SNGPL transmission system extends from Sui in Baluchistan to Peshawar in

North West Frontier province (NWFP) comprising over 4540 km of high-pressure

pipelines ranging from 6 to 30 in diameter. The distribution activities covering 125

towns and 135 villages in the Punjab and NWFP are recognized through its original

commercial and domestic consumers are being through a distribution network of

over 26550 km.

OWNERSHIP:

The company has an authorized capital of Rs.15000 million of which Rs.4992

million is issued and fully and up. The Govt. owns the majority of the shares (60%).

SNGPL is Govt. controlled institutions. The remaining 40% are owned by the private

sector. The shareholding pattern as on 30 th June 2000 was as follows.

1. President Islamic Republic of Pakistan 36.00 %

2. Individuals 14.84 %

3. Investment Companies 3.61 %

4. Insurance Companies 4.93 %

5. Joint Stock Comapanies 10.50 %

6. Financial Institutions 27.73 %

7. Modaraba Companies 1.66 %

8. Foreign Comapanies 30 %

9. Others 43 %

TOTAL 100

Hailey College of Commerce 1


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OTHERS:

(i) The deputy commissioner abandoned propertied Govt. 0.2 %

of Pakistan.

(ii) Corporations, foundations institutions and societies 0.41 %

TOTAL 0.43 %

HISTORY:

SNGPL was incorporated as a private limited company in june 1963 and was

converted to a public limited company in January 1964 under the companies Act,

1913, now companies ordinance 1984, with the object of transmission and

distribution of natural gas in the provinces of Punjab and North West Frontier. For

this purpose the company took over the existing Sui Multan pipeline system (217

miles of 16 and 80 miles of 10 diameter pipelines) from PIDC and the Rawalpindi

Wah system (82 miles of 6 diameter pipeline from the Attock Oil Company Ltd., the

companys commercial operations commenced by selling an average of 47 million

cubic feet per day (MMCFD) of gas to 67 consumers in two regions, namely Multan

and Rawalpindi.

SNGPL, undertook five major expansion projects from 1964 to 1990 with the

World Bank financing as a result of which the system capacity increased

progressively from 90 MMCFD of gas to 450 MMCFD from Sui region. These

projects are as follows with their features.

PROJECT 1 (1964 1969):

This project was comprised on 5 years and was undertaken to extend Sui

Multan to Faislabad and Lahore and then link it with Dhulian Rawalpindi Wah

system. It involved laying of 440 miles of pipeline and installation of 13200 Brake

Horsepower (BHP) compression at four stations. The flow capacity thus increased

from 90 MMCFD to 172 MMCFD at a cost of Rs.249 million.

PROJECT 2 (1970 1971):

The project was completed with 2 years. It was launched in 1970 to expand

the system capacity, from 172 MMDFD to 207 MMCFD< to cater for the

requirements of Dawood Hercules fertilizer plant s well as the additional demand of



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commissioned by March 1991. Simultaneously, SNGPL also connected Adhi and

Hkhni associated gas field with its pipeline system and extended gas supplies to new

towns in NWFP such as Abbottabad and Mansehra. It involved construction of about

92 miles of pipelines through very difficult terrain.

PROJECT 6-Phase 1 (1989-1990):

Project 6 was conceived to induct a total of 300 MMCFD gas from pirkoh and

Loti gas fields situated in the Sui region. This project was planned to be undertaken

in two phases and it was consists of two phases as phase I and phase II. In phase I

construction of 51 miles of 18/24 pipelines and installation of 2400 BHP

compressor units at a new compressor station at Sui was envisaged to link Pirkoh

and Loti fields with the Sui system and compression facilities were completed in

January 1990 at a cost of Rs.527 million.

In addition to construction of its pipelines more than 800 miles of transmission

system and 7000 miles of distribution network. SNGPL has also acted as a

contractor for outside agencies such as oil and Gas Development, Pakistan Saudi

Fertilizers, Fauji Fertilizers and Pakistan Arab Refinery Company (PARCO).SNGPL

also construction a substantial and one of the most different portion of Quetta natural

Gas Pipeline. The construction of about 310 miles of PARCO and 105 miles of

Quetta Pipeline was a tremendous challenges as these pipelines traversed all sorts

of terrain which can be encountered during the construction of cross country

pipelines, including long stretches of water lagged areas and steep rocky inclines.

PROJECTS-PRESENT AND FUTURE:

PRESENT PROJECTS

i) Augmenting of System Capacity in NWFP

In order to augment the gas supply system to overcome the problem of low

pressure during winter in NWFP, 97 Km length of pipeline of various dia,

comprising transmission spurs and distribution mains was laid and

commissioned in the fiscal year 1999 2000.



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ii) Construction of Distribution Mains

To improve the distribution network and to cater for the demands of various

consumers, 70 Km of distribution mains of various diameters ranging form 8

to 24 were laid in different regions.

iii) River Crossings

Two under construction Major River crossing (i) 30 diameter jhelum river

crossing near Malakwal and (ii) 16 diameter Kabul River crossing near

Khairabad were completed and commissioned.

iv) Replacement of Pipelines

To ensure safe pipeline operations, the company has currently undertaken

maintenance project on Sui-Guddu section, which includes:

i. Uplifting and re-laying of 10 kilometers, 24 diameter pipeline and

ii. Uplifting of 60 kilometers, 18 diameter pipeline.

v) Gas Supply to New Towns

To extend gas supply network to new cities, following new pipelines are being

laid:

a. 68 Km, 8 Dia Swat Pipeline

Starting from Sakhakot, this line would terminate at Mingora from

where gas would be supplied to major towns of Swat valley. 20 Km of

pipelines has been laid so far and project scheduled completion is

March 2002.

b. 18 Dia Crossing Chenab at Chiniot

Pipeline crossing over Chenab, which could not be constructed due to

absence of permission from NGA, is now under construction.

Completion of this crossing would substantially improve gas flow to the

north.

c. Laying of 18 diameter loopline between rahwali and Gujranwala has

been planned with a view to shift high pressure gas transmission lines



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away from city limits. This would also help improve pressure at the

gag-ends of Jhelum, Sialkot in winter season.

d. 36 dia Indus crossing at Guddu.

e. 108 Kms of 36 dia loopline between Bhong and Multan.

f. 37 Km of 8 dia transmission pipeline between Sarai Alamgir to Mirpur.

FUTURE PROJECTS:

Optimal Utilization of New Gas Fields

For optimal utilization of recently discovered gas in Sindh and displace

imported fuels specially in the power sector, the Company has undertaken a study to

determine optimum combination of looping and compression to expand its

transmission system to supply gas to power plants in Multan Region.

It has been identified to carry a total of 420 MMCFD additional gas from Sui

and Qadirpur to power plants of Multan, Muzzafargarh, Kot Addu and Abdu Hakeem.

The project has been approved in principle by the Cabinet at the total cost of Rs.

16,252 million with a mobilizing physical and financial resources for implementing

this project.

SNGPL plans to expand its system in two phases. Under phase-I the system

capacity would be enhanced to flow 100 MMCFD swapped gas from Sui to Multan

by December 2001 by laying 32 miles of 36 dia loopline between the repeater

stations A3 (Thul Hamza) and A4 (Rukanpur) in Sui-Multan section. This is expected

to be completed by December 2001 at estimated cost of Rs.1, 382 million. Under

phase II, the capacity will enhanced further to transport 320 MMCFD of gas from Sui

and Qadirpur to Multan Region with construction of 130 miles of pipelines of various

diameters ranging from 16 to 36 inches in diameter and installation of 15,000

additional horsepower of compression.



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FUTURE OUTLOOK:

Since the return to the company is asset based, the additional investment in gas

infrastructure development plan as stated above would increase the rate base and

add to the revenues of the company in the years to come. Also that with the active

support of the Ministry of Petroleum and Natural Resources and Ministry of Finance,

the company has initiated various steps to improve the liquidity and profitability of the

company. It is hoped that your company would maintain the momentum of

improvements in operating efficiencies, consumer services and profitability.



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COMPANY INFORMATION

BOARD OF DIRECTORS Lt. Gen (Retd) Ghulam Safdar Butt Chairman

Abdul Rashid Lone M D

M. Jahangir Bashar

M. Iqbal Awan

Mukhtar Ahmed

M. Khalil Mian

Javed Hussain

Zahid Hussain

Muhammad Arshad

Mian Raza Mansha

Abdul Latif Uqaili

Arif Habib

Anjum M. Saleem

Tariq Iqbal Khan

COMPANY SECRETARY Mahboob Elahi

JOINT AUDITORS A.F Ferguson & Co.Chartered Accountants

Taseer Hadi Khalid & Co.

Chartered Accountants

SHARE REGISTRARS Hameed Majeed Associates (Pvt) Ltd.

H.M. House, 7-Bank Square, Lahore

Ph:92-42-7235081-82

Ph:92-42-7358817

LEGAL ADVISORS M/s Surridge &Beecheno

Mr. Abdul Hayee Khan, Advocate

REGISTERED OFFICE Gas House,

21-Kashmir Road, P.O Box No.56

Lahore (Pakistan)

Ph: 92-42-9201451-60, 9201319

Fax: 92-42-9201229, 9201302

E-mail: [email protected]



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Policy guidelines and overall control is rested in the elected board of Directors

which includes representatives of shareholders as well as of creditors, as provided

for in the companies ordinance 1984. Presently, SNGPL Board companies 14

members, 10 of whom are nominees of Govt. and Govt. controlled institutions and 4

from private sector.

There have been a few changes in the composition of your Board of Directors

since the last Annual General Meeting held on May 22, 2001. Mr. Abdul Rashid

Lone, former Deputy Managing Director has been elevated to the position of

Managing Director and Chief Executive of the Company w.e.f July 9, 2001 in place of

Mr. Javed Hussain, Director, who was assigned the duties of the Managing Director

and Chief Executive of the Company with effect from February 3, 2001. Mr. Tariq

Iqbal Khan, Chairman and Managing Director, National Investment Trust Ltd., has

been appointed as Director of the company in place of Mr. Istaqbal Mehdi w.e.f.

November 14, 2001.

Please join me to express our appreciation and thanks for the valuable

services rendered by Mr. Javed Hussain as Managing Director and Chief Executive

of the Company and Mr. Istaqbal Mehdi. We also welcome Mr. Abdul Rashid Lone,

the newly apponted Managing Director and Chief Executive of the company and trust

that he would do his utmost in the realization of corporate objectives and the

company would substantially benefit from his vast and varied experience in the gas

sector.

In accordance with the provisions of Section 178 of the Companies

Ordinance, 1984, thirteen Directors were elected at the 35th Annual General Meeting

held on June 23, 1999 for a period of 3 years, effective June 26, 1999.



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MANAGEMENT AT HEAD OFFICE

Managing Director Abdul Rashid Lone

General Managers

Stores Zafar Iqbal

Purchases Tahir Ikram

Civil and Project Javed HussainComputer Masum Ahmad

Sales Aftab A. Khan

Accounts Amin Chaudhry

Finance Mehboob Elahi

Audit Ghulam Qadir

Admin Nasrullah Khan

Personnel Pervez Aziz Khan

Legal and Shares Shahid Hamid

Distribution Muhammad Ilyas

Billing Azam Khan

Chief Engineer Abbas Naqvi



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Management Structure of Finance/Account Department

Senior General Manager Finance/Account

General Manager Finance General Manager Account

Chief Accountant Finance Chief Accountant Revenue/Accounts

1. Deputy Chief Assist

2. Deputy Chief Cost & Planning

1. Deputy Chief Accountant H/o2. Deputy Chief Accountant Finance3. Deputy Chief Accountant Payroll(Exec)

4. Deputy Chief Accountant Payroll(Staff)

Senior Accountant

Accountant

Assistant Accountant

Subordinate Staff

Senior Accountant

Accountant

Assistant Accountant

Subordinate Staff


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COMPANY OBJECTIVES

I. The name of the company is SUI NORTHERN GAS PIPELINES LIMITED.

II. The Registered office of the Company will be situated in the Province of

Punjab Pakistan.

III. The objects for which the company is established are:

1. To acquire and take over the existing natual gas pipeline running from Sui to

Multan owned by the Government of Pakistan and presently operated on their

behalf by the West Pakistan Industrial Development Corporation, together

with all distribution, sukpply and feeder mains and other distribution facilities

already installed, or in the process of installation and the natural gas pipelines

running from Dhuliaan to Wah and Rawalpindi owned by the Attock Oil

Company Limited and to extend the said pipe lines with such branch and

distribution facilities as may be decided upon be the Company from time to

time.

2. To carry on all or any of the business of storing, transporting, transmitting,

distributing, supplying and exporting natural gas for lighting, heating, motive

power, generation of electricity, or any other purpose whatsoever.

3. To carry on in all or any of the branches of the Company all or any of the

business of dealers in natural gas and any component, constituent, product or

bye-product thereof, harbingers, merchants, carriers, ship owners andchatterers, lighter men, barge owners, factors and brokers and all other

kindred business usually carried on y gas companies and to treat and turn to

account in any manner whatsoever natural gas or any component,

constituent, product or bye-product thereof.

4. TO manufacture, sell, deal in, let for hire, fix, repair and remove natural gas

apparatus, appliances and fittings, engines, meters, indices, apparatus for

testing and measurement, stoves, cookers, gas rings, ranges, pipes, mains



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for lighting, heating, motive power, ventilating, cooking, refrigerating or any

other purposes.

5. To carry on the business of natural gas engineers, contractors, agents,

manufactures of plant, machinery, gas apparatus and works for the sale,

supply, distribution, storage, use, regulation and measurement of gas.

6. To manufacture, construct, equip, maintain, erect, lay repair, alter and remove

pressure control, metering stations, gas works and works connected

therewith, with all necessary machinery and apparatus, pipes, mains, meters,

conduits, services pipes, posts, and other materials and apparatus fro

supplying gas for heating, lighting, motive power, industrial, commercial

domestic and any other purpose whatsoever.

7. To construct, erect, equip, maintain, improve and work or auk in, contribute or

subscribe to the construction, erection, equipment, maintenance improvement

and working of any railways, tramways, piers, jetties, wharves, docks, roads,

canals, waterways, waterworks, reservoir tanks, storage installations,

pipelines, mills, factories, refineries, laboratories, electric work, gas works,

hydraulic and other works, telegraphs, telephones, plant, machinery,

appliances, dwelling houses and other buildings.

8. To acquire work and disposes of and deal in any mines, metals, minerals, clay

and other like substances and to acquire, refine, prepare for market, produce,

manufacture, del in or otherwise turn to account any mineral, animal or

vegetable substance or products.

9. To carry on any other business, whether manufacturing or otherwise, which

may seem to be company capable of being conveniently carried on in

connection with any of the objects specified herein, or calculated directly or

indirectly to enhance the value or, or render profitable, any of the companys

property or rights.



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10. To buy, sell, manufacture, repair, alter, improve, ot otherwise treat, exchange,

hire, let-out on hire, import, export and deal in all works, plant, machinery,

tools, utensils appliances, equipment, apparatus, products, materials,

substances articles and things capable of being used in any such business as

aforesaid or required by any customers of, or persons having dealing with the

company, or any such other company or body as herein mentioned, or

commonly dealt in by persons engaged in any such business, or which may

seem capable of being profitably dealt with in connection with any of the said

business and to manufacture, experiment with, render marketable and

otherwise treat and deal in all products and residual and bye-products

incidental to, or obtained, or capable of being made use of, in any of the

business carried on by the company or any such other company or body

herein mentioned.

11. To enter into any arrangements or agreements with the government of

Pakistan or any Provincial Government, or with any authorities, supreme,

national municipal, local or otherwise, or with any company, bank firm body or

persons whatsoever for the purpose of, or in connection with any of the

objects of the company.

11(A) To enter into any agreements of arrangements necessary or useful for

the company with any government, municipality of local government or

authority or any firm, company, corporation or association in Pakisatan

or elsewhere and enter into any arrangement for share in profits, union

of interest, cooperation, equity participation, joint venture, reciprocal

concession or otherwise and any business or transaction, which is

directly or indirectly likely to benefit this company and to amalgamate

with any company or companies having objects altogether or in part

similar to those or of this company and to promote, incorporate and

float any company or companies for any other purpose which my seem

directly or indirectly calculated to benefit this company or its members.

12. To expend money in experimenting on, testing, improving or seeking to

improve, any inventions, discoveries, processes or information which the

company may acquire or propose to acquire, and to finance inventors or



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alleged inventors for the purpose of enabling them to test or perfect their

inventions.

12(A) To apply for and take out, purchase or otherwise acquire and protect,

prolong and renew ny patents, patent rights, brevets d invention,

letters patent, trade marks, designs, licenses, concessions and the like

in Pakistan and abroad conferring any exclusive or non-exclusive or

limited right to use, or any secret or other information as to any

invention, processes or privilege, which may seem capable of being

used for any of the purposes of the company, or the acquisition of

which may seem calculated directly to benefit the company, and to use,

exercise, develop or grant licenses or privileges in respect of, or

otherwise turn to account the property, rights or information so

acquired and to finance inventors or research workers for the purpose

of enabling them to carry on research work, investigations, inventions,

processes and to test or perfect their inventions.

13. To sell any patent rights or privileges belonging to the company or which may

be acquired by it, or any interest in the same and to grant licenses for the use

and practice of the same or any of them, and to let or allow to be used or

otherwise deal with any inventions, patents or privileges in which the company

may be interested, and to do all such acts ands things as may be deemed

expedite for turning to account any such inventions, patents and privileges.

14. To acquire and take over the whole or any part of, or any interest in, the

business, property and liabilities of any person or persons, firm or corporation,

carrying on any business which the company is authorized to carry on, or

possessed of any property or rights suitable for the purposes of the company.

15. To promote other companies or bodies for the purpose of acquiring or

carrying on any business in which the company is engaged at any time, or is

entitled to engage, and to subscribe for shares, debentures and other

securities issued by such companies and to finance the same and to perform

any services or undertake any duties for are on behalf of the same and in any



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other manner to assist any such company on such terms as may be agreed

and either with or without remuneration.

16. To promote and form any other company for the purpose of acquiring all or

any of the property, business, rights and liabilities of the company, or for any

other purpose which may seem directly or indirectly calculated to assist or to

benefit the company, and underwrite, subscribe for or otherwise acquire all or

any part of the shares, stock, debentures or other securities of any such

company.

17. To purchase, take on lease or in exchange, hire or otherwise acquire, turn to

account and deal with, any movable or immovable property, patents, brevet d

invention, licenses, concessions, right of way, easements and like rights or

privileges which the company may think suitable or convenient for any

purposes of its business.

18. To extend the business of the company by purchasing, acquiring, getting

transferred, adding to, altering, enlarging, all or any of the buildings, mills,

factories, premises, places being the property of the of the company or on all

or any of the lands which shall for the time being be the property or in

possession of the company and to sell or mortgage or let out on hire all or any

portion of the same as may be thought desirable.

19. To pay for any properties, assets, rights or privileges acquired by the

company either in case or in fully paid up shares of the company or by the

issue of securities or partly in one mode and partly in another and generally

on such terms as may be determined.

20. To accept, as consideration for or in lieu of the hole or any part of the

companys property, other land or cash or government security or securities

guaranteed by the government or shares in joint stock companies or partly the

one and partly the other and such other properties or securities as may be

determined by the company.



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21. To enter into partnership or into any arrangement for sharing profits, union of

interest, cooperation, joint-venture or reciprocal concessions, with any person

or company carrying on or engaged in, or about to carry on or engage in, or

any business or transaction capable of being conducted so as directly or

indirectly to benefit the company. And to take or otherwise acquire shares and

securities of any such company, and to sell, hold, reissue with or without

guarantee, or otherwise del with the same.

22. To enter into an arrangements or agreements with the government of

Pakistan or any local government or any other government or state which has

acceded to Pakistan, or with any authorities, public, quasi-public, municipal,

local, railway or otherwise or with any other person or to obtain from any such

government, authority or person any right, privileges and concessions which

the company may think it desirable to obtain, and to carry out, exercise, and

comply with any such arrangements, rights, privileges and concessions, and

dispose of or turn to account the same.

23. To establish, maintain, support and subscribe to any national, charitable,

benevolent, public, general or useful object or fund or institution, society or

club which may be for the benefit or the company or its employees or ex-

employees or may be connected with any town or place where the company

carries on business; and ti give pension bonuses, gratuities or charitable aid

or relief of all kinds to any person or persons who have served the company

or to the wives, widows, children, relatives or dependents of such person or

persons or of any ex-directors of the company that may appears to the

Directors just or proper whether any such person or the wife, widow, children,

relatives or have not a legal claim upon the company; and to establish

maintain, support and subscribe to any provident or other Fund or Trust for

the benefit of any of the employees or ex-employees or ex-directors of any

company or their relatives or dependents, and to build or otherwise acquire or

take on lease or hire and to repair, alter, equip and maintain dwelling houses

or chawls, places of instruction or recreation, hospitals, dispensaries or other

institutions for providing amenities.



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24. To pay all the costs, charges, and expenses of all incidental to the promotion,

formation, registration and establishment of the company and the issue of its

capital including any underwriting or other commission, brokers fees and

charges in connection therewith, and the remunerate or make donations (by

cash or other assets or by the allotment of fully paid shares, debentures,

debenture stock or securities of this or any company, or in any other manner,

whether out of the companys capitals or profits or otherwise) to any person,

firm or company for services rendered or to be rendered in introducing any

property or business to the company or in placing or assisting to place or

guaranteeing the subscription of shares, debentures, debenture-stock or other

securities of the company, or in or about the formation or promotion of the

company or for any other reason which the company may think proper.

25. The liability of the members is limited.

26. The share capital of the company Is Rs. 15,000,000,000 (Rupees Fifteen

billion) divided in 1,500,000,000 (One billion and five hundred million) ordinary

shares of Rs. 10/- each with power to increase, reduce, modify, subdivide,

consolidate or reorganize the capital of the company for the time being and to

divide the shares into several classes in accordance with the provisions of

law.



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PERFORMANCE OF THE COMPANY

SALES AND DEVELOPMENT:

The total gas sales for the year under report were 86,806704 hundred cubic

meters (HM3) (308,111 MMCF) showing an increase of 8% over the previous year.

The sector-wise break-up of gas sales indicates that 26% gas was sold to Power,

13% to Fertilizer, 1% to Cement, 25% to General Industries and 35% to Domestic

and Commercial Sectors.

The gas distribution system during the year increased by 1,348 KMs and

113,860 new customers were added, raising the total to 1,86,583. The company is

committed to make natural gas available to more prospective consumers subject to

its financial position and technical capabilities. Rather than extending gas network to

far flung subsidized domestic sector, the policy is now to increase consumers

density, optimize utilization of existing infrastructure and restricting mains laying to

system augmentation and removal of anomalies.

ACCOUNTS AND FINANCE:

The company earned net profit before to of Rs. 2,329.323 million which showsan increase of 71% over that earned in the previous year. The increase in profit is

attributable to substantial reduction in the financial charges mainly due to limited

borrowings at lower bank rate, repayment of GOP medium term loan amounting to

Rs. 2,800 million and larger internal cash generation enabling the company to effect

timely payments of gas producers invoices. After allowing for taxation of Rs. 992.754

million, the company has earned after tax profit of Rs. 1,336.569 million which is

higher by 154% over the previous year. The accompanying report of the Directors

recommends appropriations.

With the active support of the Ministry of Petroleum and Natural Resources

and Ministry of Finance, the balance sheet the company has been restructured by

deferring current liabilities into medium to long term liabilities thereby enabling your

company to achieve the financial ratios.



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LIQUEFIED PERTOLEUM GAS (LPG):

The transfer of LPG assets to M/s. Shell gas LPG (Pakistan) Limited was

effectuated on October 15, 2001, subsequent to the balance sheet date. The net

proceeds of Rs. 139.530 million have been received from the privatization

commission on basis of the auction conducted by tem as authorized by the

shareholders at their 36th Annual General Meeting held on December 30, 1999.

CUSTOMER SERVICES:

In order to facilitate consumers in payment of bills, following steps have been

taken by the company.

Timely delivery of bills

Installation of facilities to issue computerized duplicate bills

Rounding off bills to the nearest Rs. 10/-

Collection of bills through the Post Office

The company is presently in the process of introducing on lines processing

of new connections by computerizing the entire process from receipt of new

application to issue of the first bill which will ensure that all connections are

processed on merit and that the bill is sent to the consumer master record for

immediate rectification and future reference. Through this mechanism, the company

will be able to respond in time and take appropriate action for redressing the

consumers complaints. Model consumer service centers are being set up to provide

services to the consumers regarding new application, billing problems, leakage

complaints and payment of bills. The performance of emergency complaint team is

being monitored so that companys image becomes more consumers friendly.

Universal Access No. (UAN 119) is functioning in all regions of the company, through

which consumers can readily contact the companys office on round the clock basis.

OPERATIONAL EFFICIENCY:

As a result of the concerted efforts made by undertaking a well-planned

leakage rectification project, gas losses have reduced. The company has also

undertaken system rehabilitation and pipeline integrity project to improve flow of gas

and optimize the system capacity utilization.



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TELECOMMUNICATIONS:

A state of the art transmission SCADA system has been installed and

commissioned. The system covers all the gas sources; compressor stations,

repeater stations and major sales meter stations. The system will help to operate the

pipelines in optimum condition. Pneumatic controlled actuators are also being

installed on repeater stations and block Valve Stations. In case of any emergency,

this will enable the Gas Control Center to operate any valve remotely.

PROFIT DISTRIBUTION:

In 2001 company declared a dividend of Rs. 1.70 per share of Rs. 10 each i.e.

17% for the year ended June 30, 2001 as recommended by board of director.



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DEPARTMENTS AT HEAD OFFICE

The following are the departments in head office of Sui Northern Gas pipeline

Limited.

1. Finance Department

2. Account and Audit Department

3. Personnel Department

4. Project Department

5. Purchase Department

6. Sales Department

7. Inventory Department

8. Billing Department

1. FINANCE DEPARTMENT:

As we know that the finance is the lifeblood of the business. Without finance

there is no concept of business. Hence for this purpose there should be one

finance department to arrange and control all finance activities of thebusiness.

In this organization there is a finance department, which control and arrange

the financial and capital circumstances. The finance department of the Sui

Northern gas pipeline Limited has engaged with the following.

Tax Affairs:

As we know that tax is the compulsory duty imposed on every

body/person under tax laws. So for this purpose the finance

department provides the services to over come the tax affairs of the

company.

Financial Institution:

In modern business world not only every large but also medium scale

businesses are engaged to solve the financial or capital problems with

the financial institutions. These institutions provide funds to run and to



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start. The business. These institutions also give the amount for the

purpose projects of different natures of the different business

organizations

So SNGPL also joint the various financial institutions in respect of

managing and arranging the funds. All it is done by the financial

department of SNGPL. This department control by the finance

manager of the company.

The following are some financial institutions from which company

borrow the funds viz.

I. PICIC

II. ICP

III. NIT

IV. BEL

V. ABN Amro

VI. IDCP

VII. Standard Bank ets.

2. ACCOUNTS AND AUDIT DEPARTMENT:

It is second most important and significant department of every organization.

Without Account and Audit Department any organization cannot move and

without it is very much difficult to now. The exact position of the business

organization. Because all business transactions are recorded in the books of

account which are kept by the accounts and audit department. The most

important function of Account department to prepare income statement and

balance sheet at the end of every financial year.

In SNGPL there is account department, which segregate into different

sections. Say, ledger section, payroll section, cash section, etc.

Without the attach of this, there is a audit department which basically known

as internal audit department. By virtue of this department there are very little

chances to make any mistake because there is a very stick and logical audit

process. Both are control and manage by the account manager and audit

manager.



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3. PERSONNEL DEPARTMENT:

Personnel department plays an important role in the functioning of any

business organization and especially in those, which deal in manufacturing,

generally speaking, personnel department deals in personnel. Specifically

speaking, the main function of personnel department of the company under

review is to manage and supervise the overall functioning of personnel

community and to check that either they contributions are satisfactory and in

accordance with the overall goals of the company to achieved.

The personnel department performs the functions like the recruitment of the

employees. It determine the wages and salaries for this companys

employees either working on plant or corporate office. It also arrange for their

transfers in different sections. It arrange for the medical facilities to them. It

also take every chance to provide to them are also supervised by the

personnel department. Transportation facilities are also provided to company

employees by this department on behalf of the company.

It negotiates with the representatives of the workers union to settle down a

number of matters conduct during ordinary course of business. It is also

responsible to create land maintain cordial relations between the employers

and employees, it functions to maintain the desired air of confidence in order to

have such an atmosphere in which team spirit will be there a need whole.

4. PROJECT DEPARTMENT:

As it is mention in the report various projects, which were completed, the

company has completed or/and. All these projects are/were managed and

controlled by the project department. It is very much important department of

the company because this department is making all the developing plans. It is

control and organization by project manager.

5. PURCHASE DEPARTMENT:

Purchase department is playing a vital role in every manufacturing concern.

SNGPL is up-to an extent a manufacturing concern. It manufactured its own

pipes of different diameter. Like 8, 10, 12 and so on. It is function of this

department to purchase higher-pressure compressors, pipes LPG etc. This

department also managed by the purchase manager.



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6. SALES DEPARTMENT:

SNGPL engaged in selling of natural gas and liquefied petroleum gas (LPG)

and to control selling activities of the company. It is very much necessary to

that in every organization. There must be a sales department. In SNGPL there

is a sales department, which manage all selling activities and also establish the

estimates for the next financial year, is a most important function of sales

department. All these activities are watched by sales manage.

7. INVENTORY DEPARTMENT:

This department is very important in every organization. In SNGPL this

department checks and maintain a necessary inventory level, which is required

by the company. This department is supervised by inventory manger.

8. BILLING DEPARTMENT

It has also great importance because all the collection o customer is recorded

and received by this department. The meter reader checks the reading of every

gas meter, then these readings are compared to previous ones and the

difference is changed a rate which is different for domestic and commercial

users of gas. This department also maintains up-to-date record of each and

every client and headed by billing manager.



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SIGNIFICANT POLICIES

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1.1 Compliance with International Accounting Standards (IAS)

These accounts comply with international Accounting Standards as

applicable, in Pakistan, in all material respects and requirements of the

companies Ordinance, 1984.

1.2 Accounting Convention

These accounts have been prepared under the historical cost convention,

modified by capitalization of exchange differences referred in Note 2.5.

1.3 Employee Benefits

The main features of the schemes operated by the company for its employees

are as follows:

a) The company operates an approved funded pension scheme for all

employees and an approved funded gratuity scheme for employees

with a qualifying service period of five years. Contribution to the foundsare payable on the basis of actuarial valuation. The future contribution

rates of the scheme include allowance for deficit and surplus.

Under the companys service rules, executives retiring from service are

to surrender th of the pension entitlement. The sum surrendered is

paid as gratuity after deducting their form the amount of gratuity pay

able under the companys gratuity scheme.

The company provides free gas and reimbursement of medical

expenditure to the employees after retirement on payment basis.

Consequential to revision in salary packages of executive, post

retirement free gas facility has been discontinued, with effect from

January 1,2001.Provisions are maid annually to cover the obligation on

the basis of actuarial valuation and are charged to income currently.

The most recent valuations were carried out as of June 30,2001 using

the projected unit credit method.



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The actuarial valuations for the above plans determined a transitional

liability for post employment benefits amounting to Rs.568.648 million

attributable to medical benefits and free gas facility and Rs.44.941

million for pension and gratuity for non-executive staff. Under the

transition provision of IAS 19, the transitional liability is bringing

amortized over a period of five years.

The principal actuarial assumptions used in the valuation of these

schemes as of June 30, 2001 are:

Gratuity Fund Pension Fund

Executive Non-Executives Executives Non-Executives

Contribution rates (% ofbasic Salaries)

8.33% 6.50% 16.37% 15.80%

Expected rate of growthper annum in futuresalaries

10% 10% 10% 10%

Expected rate of returnper annum of fund foractive member

13% 13% 13% 13%

Expected rate of returnper annum for retiredmembers under the

pension fund scheme

14% 14% 14% 14%

Actual return on planassets during this years

- - 8% 8%

(Rupees in thousand) 8,183 60,791 45761 58,491

Medical Free Gas

Executive Non-Executives Executive Non-Executives

Discount rate 13% 13% 13% 13%

Expected rate of growthper annum in average costof facility

10% 10% 10% 10%

Increase in average costof medical facility peremployee due to increasein age of recipient

2% 2% - -

Rate of utilization of facilityby future entitled

employees

- - - 100%



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The companys policy with regard to actuarial gains and losses is to follow the

minimum recommended approach under ISA 19 (revised 1998)

b) The company provides annually for the expected cost of accumulated

absences and leave far assistance on the basis of actuarial valuations.

As at June 30, 2000 the change in counting policy resulted in a

transitional liability, which is being recognized over a period of three

years as permitted by Securities and Exchange Commission of

Pakistan through circular 17 dated Nov 21, 2000. The portion of the

transitional liability unrecognized as at June 30, 2001 is Rs. 53.0027

million (2000: Rs. 110.634 millions).

c) The company operates and improved defined contribution provident

funds for all permanent employees. During the year Rs. 64.922 millions

(2000: Rs. 43.240 millions) has been charged as n expense by the

company.

2.4 Taxation

The charge for current taxation is based on taxable income at the current

rates of tax after taking into account tax credits available, it any.

The company accounts for deferred tax using the liability method all

significant timing difference, if these are lightly to reverse in the foreseeable

future and will not be replaced.

2.5 Fixed Capital Expenditure and Deprecation

Operating fixed assets except freehold and leasehold land are stated at cost

less accumulated depression.

Freehold and leasehold land and capital work in progress are stated at

cost. Cost in relation to certain assets signifies historical cost and exchange

difference referred to in Note 2.10 and borrowing cost refereed to in Note

2.11.

Depreciation is charged to income on he straight line method so as to write off

the cost of an asset over rates estimated useful life at the rates give in Notes

14. Transmission and distributions system, matter and compressor stations

and equipment are depreciated at annual rated in accordance with the term of

loan agreement (3252-PAK) with the World Bank. This agreement requires



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that depreciation the charged at rates not less than 6% per annum of the

average cost of such assets in operation.

Half years depreciation is charged on additions during the year. No

depreciation is charged on assets deleted during the year, except for assets

transferred t executive under service rules where depreciation is charged you

until the date of executives retirement.

Pipelines uplifted during the year are deleted from operating fixed assets.

60% - 65% are the written down value of the uplifted pipelines representing

cost of pipelines and fittings is transferred to capital work in progress after

considering it reuse capability. The balance of the written down value

representing construction overheads is charged to income.

Major renewals and improvements are capitalized. Minor replacements,

repairs and maintenance are charges to income.

2.6 Assets Subject to Finance Lease

These are stated at the lower of present value of minimum lease payment

under the lese agreement and the fair value of the assets acquired all lease.

The aggregate amount of obligation relating to assets subject to finance lease

is accounted for at the net present value of liabilities. Value of the leased

assets is depreciated over the useful lives of assets using the straight-line

method at the rates given in Note 15. Depreciation of the leased assets is

charged to income. The related obligations of the lease are accounted for as

liabilities.

2.7 Deferred Credit

Amounts received from consumers and the governments contributions and

grants toward the cost of supplying and laying transmission lines, service lines

and mains are deferred for amortization over the estimated useful lives of

related assets.

2.8 Stores and Spares

These are valuated at monthly moving average cost, while items considered

obsolete are carried at nil value. Items in transit are valued at cost comprising

invoice value plus other charges paid thereon.



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2.9 Stock-in-Trade

Stock of gas in pipelines and LPG in containers are values at the lower of cost

determined on an average basis and net realizable value. Net realizable value

signifies the estimated selling price in the ordinary course of business less

costs necessary to be incurred in order to make the sale.

2.10 Foreign Currencies

Foreign currency transactions are recorded using the rate of conversion

applicable on the date of transaction except where foreign exchange contracts

has been entered into, the rates contracted for are used. All assets and

liabilities in foreign currencies are translate at exchange rates prevailing at the

year and except for foreign currency borrowing covered by the State Bank of

Pakistans exchange risk coverage scheme, which are translated at the rate

provided under the scheme.

Exchange difference on foreign currency loans used for acquisition of fixed

assets are capitalized as part of the of the cost of assets. All others exchange

differences are included in income.

2.11 Borrowing Cost

Mark-up, interest, profit and other charges on non-participatory redeemable

capital and long terms loans are capitalized for the period, up to the date of

commissioning of the respective assets acquired of the proceeds of such

borrowings. All other mark up, interest, profit and other charges are charged

to income during the year

2.12 Long Term Investments

These are started at cost less any permanent diminution in the value of

investments.

2.13 Revenue Recognition

Revenue from gas sales in recognized on the basis of gas supplied to

consumer at the rate fixed by the Government of Pakistan.



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2.14 Gas Development Surcharge

Under the provisions of World Bank loan 3252-PAK, the company is operating

on an annual return of not less than 17.50% on the value of its average fixed

assets in operation (net of referred credit), before corporate income taxes,

interest and other charge on debt and after excluding interest, dividends and

others non-operating income. Any deficit or surplus on account of this is

recoverable from or payable to the Government of Pakistan as differential

margin or gas development surcharge.



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MY ASSIGNMENT

On the behalf of the Head office SNGPL I am directed to perform internship in

their WAH CANTT station. As I am living in WAH CANTT so I am requested the

higher management to allow me to do my internship braining from WAH station. At

WAH CANTT there are three main departments namely.

i) Accounts department

ii) Audit department

iii) Billing department

I mainly work in accounts department. The head of this functioning

department is Mr. Asif and my supervisor was Mr. Asim. The work I had done there

is.

i) Payment to constructors.

ii) Preparation of income tax returns.

iii) Preparation of voucher of overtime.

iv) Preparation of imprest book.

v) Preparation of banking reconciliation statement.

i) PAYMENT TO CONTRACTORS:

Sui Northern gas pipelines limited performs many activities. After the

completion of the work the contractors are paid the required amount contractors may

engage in kind of activates as: -

a. Ditching of pipelines

b. Transportation of pipelines

c. Civil work and construction

d. Welding inspection

e. Consultancy contracts

a. Ditching of pipelines:

The contractors perform all the ditches of pipelines. Before such type of

work a tender is called by various contractors and most appropriate



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contractor on the basis of rate and prestige is selected and work is

issued to it.

b. Transportation of pipelines:

Contractors perform all the transportation of pipelines. They transport

the pipes from the harbor or factories to the required places.

c. Civil work and construction:

Contractors also perform the work of construction like some building

etc.

d. Welding inspection:

The contractors later on inspect welding procedure of pipes to check

and detect the faults in the welding process.

e. Consultancy contracts:

The contractors also perform the consultancy services, as they are

experts in their field so they are also contracted to perform such duty.

Procedure of payments:

The contractors are paid after they perform their work or completed their

contracts after the inspection of their work done the concerned department

approves the payment then vouchers and necessary documents is prepares

and check and verified by the audit department and after necessary initials

cheque is given to the contractor.

ii) Preparation of income tax returns:

All contractors have to pay the income tax on the payment received by

SNGPL. They do not pay income tax directly to the authorities but income tax is

dedicated out of the payments and deposited into the bank by SNGPL.

A pink colour vouchers is prepared for payment and a white colour voucher is

used for the deduction of income tax. Normally tax is deducted @ 5% of the whole

payment and the contractors having National Tax Number (NTN) required to pay the

tax @ 3%.



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Procedure of preparation:

First of all amounts and fees claimed by the contractors are verified. Then a

pink colour voucher is prepared for the payment on which income tax

deduction is mentioned. Then the voucher is verified and initialized by the

head of audit department. Then a white colour voucher of deduction of income

tax is prepared. All these vouchers has three copies one for the contractor

one for the tax office and one is submitted to the head office. At the end of the

year yearly return is prepared and the copy is sent to income tax department I

personally perform the above-mentioned activities.

iii) Preparation of voucher of overtime:

I have also performed the work of preparation of overtime payment vouchers.

Overtime is claimed by various employees of SNGPL and after certain verification at

a specific rate overtime payment is made to them.

Procedure of payment:

An overtime claimed vouchers which is filled by the workers is dent to the

accounts department first of all we have to see that whether the overtime

hours are initialized by the supervisor of the department usually the out station

employees are paid at double rate like meter readers, chowkidars etc. and

eternal workers like sub engineers, cashiers etc. are paid on single hour rate

system. And at lat at the end of the month the amount of overtime is added in

the salary of the employee and paid to him.

iv) Maintenance of imprest book:

An imprest book is prepared in which each and every entry is recorded. After

the payment to contractors a voucher is prepared and processed and is entered in

the imprest book in which every work has a different code no. to be identified easily.

After imprest book monthly trial balance is prepared and at the end of year yearly

trial balance is prepared.

Writing the imprest book is quire a difficult task because all the work done is

manual son chances of errors are many.



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v) Preparation of banking reconciliation statements:

At the end of each month banking reconciliation statement is prepared to

check and confirm the bank balance and the cash balance of the company. It is a

difficult job, but now a days it is ordered that decimal discrepancy can be rounded

off.

At the end of the each month banking reconciliation statement is prepared by

checking the entries made in the imprest book and also by checking the list of

payment and receipts of bank which is issued by the banks to checked at the office

level. Suppose a contractor s paid a cheque which no. is say 563241 now we have

to see that whether that cheque is cleared by the bank with the same amount or not.

The Wah Cantt office deals with National Bank of Pakistan and Muslim Commercial

Bank of Pakistan, both banks provide their bank statements at the end of each

month for reconciliation purpose.

So these are some works, which I have performed during my internship-

training programme in Sui Northern Gas Pipelines Limited (SNGPL). I observed that

I have gained some kind of practical experience through this organization, which

helps me in my near future.



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FINANCIAL STATEMENT ANALYSIS

Financial statement like as income tax statement and balance sheet provide

the more significant information about he provision of the business and the results of

its operation. The parties that are more interested to know the results and financial

operations of the companies are: -

i) Stock holder of the company.

ii) The management of the company.

iii) The creditor such as banks and other financial institution from those company

has borrowed short, medium or long term funds.

iv) Govt. agencies, such as income tax department.

v) Employees of the company.

vi) General public including students and researchers.

Generally, above mentioned parties are interested to know,

i) Solvency position of the company.

ii) Stability of the company.

iii) Profitability of the company.

Comparison and analysis can be made on a number of different basis. I have

analyzed the financial statement of the company by using the following methods.

1. Horizontal Analysis

2. Vertical Analysis

3. Ratio Analysis



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FINANCIAL STATEMENTSSUI NORTHERN GAS PIPELINES LTD

BALANCE SHEETAs at 30th June 2001

(Rupees in thousands)

LIABILITIES 2001 2000 1999

SHARE CAPITAL AND RESERVES

Authorized capital

Ordinary shares of Rs. 10 each 15,000,000 5,000,000 5,000,000

Issued, Subscribed and paid up capital 4,991,866 4,340,753 37,741,568

Reserves 1,758,682 1,921,795 1,961,867

Unappropriated profit 1,803 1,851 1,264

6,752,351 6,264,399 5,737,699NON-PARTICIPATORY REDEEMABLE

CAPITAL SECURED 2,211,682 2,898,603 2,395,092

DEFERRED CREDIT 3,820,602 3,194,350 2,783,107

LONG TERM & DEFERRED LIABILITIES

Long term loans Unsecured 9,365,083 6,755,368 9,895,717

Security deposits 3,040,623 1,670,921 1,338,108

Liabilities against assets subject to finance lease 54,967 124,592 404,797

Deferred Taxation 4,128,560 3,326,809 2,625,629Employee benefits 744,190 387,290 -

177,333,423 12,264,980 14,264,251

CURRENT LIABILITIES

Current portion of non-participatory

Redeemable capital-Secured 1,457,755 1,167,708 1,326,480

Current portion of long term loans-Unsecured 1,209,464 2,814,154 818,670

Current portion of liabilities against assetssubject to finance lease

69,625 284,200 401,014

Short term finances-Secured - 245,000 320,000Propose dividend 848,617 - -

Creditors, Accrued & other liabilities 9,533,703 10,598,222 11,939,108

13,119,164 15,111,284 14,805,272

CONTINGENCIES & COMMITMENTS - - -

43,237,222 39,733,616 39,985,421



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FINANCIAL STATEMENTSSUI NORTHERN GAS PIPELINES LTD

BALANCE SHEETAs at 30th June 2001

(Rupees in thousand)

ASSETS 2001 2000 1999

FIXED CAPITAL EXPENDITURE

Operating fixed assets 24,718,532 24,835,541 23,028,203

Assets subject to finance lease 224,600 907,950 1,375,100

Capital work-in progress 3,889,060 3,226,027 4,721,773

Advance for land 101,674 100,777 141,587

28,933,866 290,702,905 29,266,663

LONG TERM LOANS 181,510 195,512 212,917

LONG TERM DEPOSITS & PREPAYMENTS 15,760 10,159 15,734

LONG TERM INVESTMENTS 85,001 85,001 85,001

CURRENTS ASSETS

Stores and spares 647,083 567,373 654,853

Stock-in-trade 131,895 94,156 67,126

Trade debts 8,798,261 5,877,823 5,207,580

Loans, advances, deposits, prepayments& other receivables

1,220,833 2,013,396 3,192,980

Income tax recoverable 636,362 403,936 504,962

Cash and bank balance 2,586,601 1,515,965 777,605

14,021,085 10,372,649 10,405,106

43,237,222 39,733,616 39,985,425

Documents

SNG Project