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 30th June 2000 was as follows. 1. 2. 3. 4. 5. 6. 7. 8. 9. President Islamic Republic of Pakistan Individuals Investment Companies Insurance Companies Joint Stock Comapanies Financial Institutions Modaraba Companies Foreign Comapanies Others TOTAL 36.00 % 14.84 % 3.61 % 4.93 % 10.50 % 27.73 % 1.66 % 30 % 43 % 100

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OTHERS: (i) (ii) The deputy commissioner abandoned propertied Govt. of Pakistan. Corporations, foundations institutions and societies TOTAL 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 Hailey College of Commerce 2 0.41 % 0.43 % 0.2 %

Sui Northern Gas Pipelines Ltd general industry, involving construction of 97 miles of pipeline and installation of additional 9900 BHP of compression at a cost of Rs.96 million. ROJECT 3 (1971 1973): Project 3 was started in 1971 and it was based on project 2 as a logical extension. Under this project gas supplies were further extended to Daudkhel, Gujranwala, Peshawar, Mardan, Charsadda and Takhtbai. It entailed construction of 380 miles of pipeline and addition of 10600 BHP compression, which resulted in augmenting he system capacity from 207 MMCFD to 277 MMCFD at a cost of Rs.416 million. Until 1972 all the major pipelines in Pakistan were constructed with the help of foreign contractors. SNGPL, however, from the very beginning, had maintained a small construction group for construction of small spurs on transmission system not big enough to be contracted out. By 1973 SNGPL crew had attained sufficient experience and expertise to undertake bigger jobs. SNGPL, therefore, undertook construction of 70 miles of 10 inch diameter pipeline, one river crossing and shifting of four compressor units from one station to the other under project 3. After successful completion of this undertaking the World Bank also recognized SNGPLs construction capabilities SNGPL has now entered the age of self sufficiency as far as designing and construction of high pressure gas pipeline systems were concerned. PROJECT 4 (1974 1981): This project, which was an indigenous effort from its conception to execution, increased the system capacity to 378 MMCFD. It was undertaken to meet the increased demand of WAPDA and Pakistan-Arab Fertilizer and extend gas supplier to additional towns in the north. It involved erection oftwo purification banks at Sui (110 MMCFD each) construction of 222 miles of pipeline and installation of 34700 BHP compression at a cost of Rs. 1345 million. PROJECT 5 (1985 1991): Project 5 was undertaken to further enhance the system capacity to 450 MMCFD. It envisaged construction of 489 miles of pipeline ranging in diameter from 8 inch to 24 inch and erection of a purification bank of 120 MMCFD at a total cost of Rs.3260. this project was completed in 1990, while the purification bank was Hailey College of Commerce 3

Sui Northern Gas Pipelines Ltd 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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Sui Northern Gas Pipelines Ltd 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. ii. v) Uplifting and re-laying of 10 kilometers, 24 diameter pipeline and Uplifting of 60 kilometers, 18 diameter pipeline.

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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Sui Northern Gas Pipelines Ltd away from city limits. This would also help improve pressure at the gag-ends of Jhelum, Sialkot in winter season. d. e. f. 36 dia Indus crossing at Guddu. 108 Kms of 36 dia loopline between Bhong and Multan. 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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Sui Northern Gas Pipelines Ltd

COMPANY INFORMATION
BOARD OF DIRECTORS Lt. Gen (Retd) Ghulam Safdar Butt Abdul Rashid Lone 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 REGISTERED OFFICE M/s Surridge &Beecheno Mr. Abdul Hayee Khan, Advocate 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: info@sngpl.com.pk Chairman MD

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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 35 th 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 General Managers

Stores Purchases Civil and Project Computer Sales Accounts Finance Audit Admin Personnel Legal and Shares Distribution Billing

Abdul Rashid Lone

Zafar Iqbal Tahir Ikram Javed Hussain Masum Ahmad Aftab A. Khan Amin Chaudhry Mehboob Elahi Ghulam Qadir Nasrullah Khan Pervez Aziz Khan Shahid Hamid Muhammad Ilyas Azam Khan Abbas Naqvi

Chief Engineer

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Sui Northern Gas Pipelines Ltd

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. 2. 3. 4.

Deputy Chief Accountant H/o Deputy Chief Accountant Finance Deputy Chief Accountant Payroll(Exec) Deputy Chief Accountant Payroll(Staff)

Senior Accountant

Senior Accountant

Accountant

Accountant

Assistant Accountant

Assistant Accountant

Subordinate Staff

Subordinate Staff

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Sui Northern Gas Pipelines Ltd

COMPANY OBJECTIVES
I. II. III. 1. The name of the company is SUI NORTHERN GAS PIPELINES LIMITED. The Registered office of the Company will be situated in the Province of Punjab Pakistan. The objects for which the company is established are: 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 and chatterers, 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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Sui Northern Gas Pipelines Ltd 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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Sui Northern Gas Pipelines Ltd 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 Hailey College of Commerce 14

Sui Northern Gas Pipelines Ltd 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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Sui Northern Gas Pipelines Ltd 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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Sui Northern Gas Pipelines Ltd 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 exemployees 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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Sui Northern Gas Pipelines Ltd 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. 26. The liability of the members is limited. 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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Sui Northern Gas Pipelines Ltd

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 shows an 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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Sui Northern Gas Pipelines Ltd 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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Sui Northern Gas Pipelines Ltd 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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Sui Northern Gas Pipelines Ltd

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 the business. 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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Sui Northern Gas Pipelines Ltd 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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Sui Northern Gas Pipelines Ltd 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. Hailey College of Commerce 24

Sui Northern Gas Pipelines Ltd 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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Sui Northern Gas Pipelines Ltd

SIGNIFICANT POLICIES
1. 1.1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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 founds are 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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Sui Northern Gas Pipelines Ltd 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
Executive Non-Executives

Pension Fund
Executives Non-Executives

Contribution rates (% of basic Salaries) Expected rate of growth per annum in future salaries Expected rate of return per annum of fund for active member Expected rate of return per annum for retired members under the pension fund scheme Actual return on plan assets during this years (Rupees in thousand)

8.33% 10% 13%

6.50% 10% 13%

16.37% 10% 13%

15.80% 10% 13%

14% 8,183

14% 60,791 Medical

14% 8% 45761

14% 8% 58,491 Free Gas

Executive

Non-Executives

Executive

Non-Executives

Discount rate Expected rate of growth per annum in average cost of facility Increase in average cost of medical facility per employee due to increase in age of recipient Rate of utilization of facility by future entitled employees

13% 10%

13% 10%

13% 10%

13% 10%

2%

2%

100%

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Sui Northern Gas Pipelines Ltd 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 Hailey College of Commerce 28

Sui Northern Gas Pipelines Ltd 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. Hailey College of Commerce 29

Sui Northern Gas Pipelines Ltd 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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Sui Northern Gas Pipelines Ltd 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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Sui Northern Gas Pipelines Ltd

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) ii) iii) Accounts department Audit department 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) ii) iii) iv) v) i) Payment to constructors. Preparation of income tax returns. Preparation of voucher of overtime. Preparation of imprest book. Preparation of banking reconciliation statement. 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. b. c. d. e. a. Ditching of pipelines Transportation of pipelines Civil work and construction Welding inspection Consultancy contracts 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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Sui Northern Gas Pipelines Ltd 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%. Hailey College of Commerce 33

Sui Northern Gas Pipelines Ltd 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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Sui Northern Gas Pipelines Ltd 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 internshiptraining 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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Sui Northern Gas Pipelines Ltd

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) ii) iii) iv) v) vi) Stock holder of the company. The management of the company. The creditor such as banks and other financial institution from those company has borrowed short, medium or long term funds. Govt. agencies, such as income tax department. Employees of the company. General public including students and researchers.

Generally, above mentioned parties are interested to know, i) ii) iii) Solvency position of the company. Stability of the company. 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. 2. 3. Horizontal Analysis Vertical Analysis Ratio Analysis

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Sui Northern Gas Pipelines Ltd

FINANCIAL STATEMENTS
SUI NORTHERN GAS PIPELINES LTD BALANCE SHEET As at 30th June 2001 (Rupees in thousands) LIABILITIES SHARE CAPITAL AND RESERVES Authorized capital Ordinary shares of Rs. 10 each Issued, Subscribed and paid up capital Reserves Unappropriated profit NON-PARTICIPATORY REDEEMABLE CAPITAL SECURED DEFERRED CREDIT LONG TERM & DEFERRED LIABILITIES Long term loans Unsecured Security deposits
Liabilities against assets subject to finance lease

2001

2000

1999

15,000,000 4,991,866 1,758,682 1,803 6,752,351 2,211,682 3,820,602 9,365,083 3,040,623 54,967 4,128,560 744,190

5,000,000

5,000,000

4,340,753 37,741,568 1,921,795 1,961,867 1,851 1,264 6,264,399 2,898,603 3,194,350 6,755,368 1,670,921 124,592 3,326,809 387,290 5,737,699 2,395,092 2,783,107 9,895,717 1,338,108 404,797 2,625,629 -

Deferred Taxation Employee benefits CURRENT LIABILITIES Current portion of non-participatory Redeemable capital-Secured
Current portion of long term loans-Unsecured

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

Current portion of liabilities against assets subject to finance lease Short term finances-Secured Propose dividend Creditors, Accrued & other liabilities

1,457,755 1,209,464 69,625 848,617 9,533,703 13,119,164

1,167,708 2,814,154 284,200

1,326,480 818,670 401,014

245,000 320,000 10,598,222 11,939,108 15,111,284 14,805,272

CONTINGENCIES & COMMITMENTS

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

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Sui Northern Gas Pipelines Ltd

FINANCIAL STATEMENTS
SUI NORTHERN GAS PIPELINES LTD BALANCE SHEET As at 30th June 2001 (Rupees in thousand) ASSETS FIXED CAPITAL EXPENDITURE Operating fixed assets Assets subject to finance lease Capital work-in progress Advance for land LONG TERM LOANS
LONG TERM DEPOSITS & PREPAYMENTS

2001

2000

1999

24,718,532 224,600 3,889,060 101,674 28,933,866 181,510 15,760 85,001

24,835,541 907,950 3,226,027 100,777 290,702,905 195,512 10,159 85,001

23,028,203 1,375,100 4,721,773 141,587 29,266,663 212,917 15,734 85,001

LONG TERM INVESTMENTS CURRENTS ASSETS Stores and spares Stock-in-trade Trade debts Loans, advances, deposits, prepayments & other receivables Income tax recoverable Cash and bank balance

647,083 131,895 8,798,261 1,220,833 636,362 2,586,601 14,021,085 43,237,222

567,373 94,156 5,877,823 2,013,396 403,936 1,515,965 10,372,649 39,733,616

654,853 67,126 5,207,580 3,192,980 504,962 777,605 10,405,106 39,985,425

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