LNG terminal contract: Abbasi rules out embezzlement, instead claims savings

Says ETPL submitted a commercially competitive bid for the project

ISLAMABAD:

The National Accountability Bureau (NAB) held a two-day marathon session with the minister of petroleum and heads of gas distribution companies in order to probe an alleged scam in the liquefied natural gas (LNG) terminal contract.

The hearing was held after the minister wrote a letter to the NAB chief, calling for a sitting for giving presentation on the LNG issue.



According to officials aware of the development, Petroleum and Natural Resources Minister Shahid Khaqan Abbasi ruled out any embezzlement and misappropriation of funds in awarding the LNG terminal contract to Engro subsidiary, Elengy Terminal Pakistan Limited (ETPL). “All stakeholders had been taken on board in the process,” he said.

Abbasi dismissed the perception that the country would suffer a loss of $2 billion in the wake of the fast-track LNG services project awarded to ETPL. Instead, he said, the country would save Rs200 billion per annum if all oil-based plants were run on LNG.

Pakistan had already suffered a loss of over $3 billion due to delay in LNG import, he said, pointing out that the terminal was needed to import LNG and its tariff was the lowest in the region.

NAB was told that a pre-bid meeting was held on September 16, 2013, which was attended by 20 potential bidders. The consultant and representatives of Sui Southern Gas Company (SSGC), Inter-State Gas Systems and the Ministry of Petroleum were also present. The consultant gave a presentation on the project structure and the draft LNG services agreement.

The proposal taken to the Economic Coordination Committee (ECC) for approval was from Engro Vopak Terminal Limited (EVTL) and not of ETPL. EVTL, a joint venture between Engro and Royal Vopak of the Netherlands, has an operating chemical and liquefied petroleum gas (LPG) jetty at Port Qasim since 1997.



EVTL proposed that the jetty could be modified at a cost of $40 million within six months that would handle 1.5 million tons of LNG per annum on an “interruptible basis”. This meant that the supply of re-gasified LNG would be discontinued every alternative week for five days. This also meant that not more than 1.5 million tons of LNG would be handled per annum. The idea was to start the flow of LNG while the government could float a tender for an independent LNG terminal.

However, contrary to the proposal submitted in the ECC, the government decided to invite tenders for an exclusive and independent LNG terminal capable of handling 3 million tons per annum and that too without any interruption.

This was a totally new project in which ETPL participated. However, EVTL did not submit a bid as it could not meet the requirements due to its offer of intermittent and small LNG supplies within six months. The tender gave the bidders 11 months to construct the new terminal.

The scope of work included construction of a new and much larger berth, extensive dredging of a berthing basin and a 24km high-pressure pipeline network to connect to the SSGC grid.



The cost estimate ranged from $140 to $150 million and according to the independent consultants ETPL technically qualified for the project with a commercially competitive bid.

ETPL made an upfront investment of Rs15 billion in the project and was bearing a monthly operating cost of about Rs500 to Rs700 million.

NAB also investigated the oil and gas affairs during the previous Pakistan Peoples Party (PPP) government.

Former petroleum secretary Ijaz Chaudhry and other officials appeared before a NAB team to respond to queries about alleged corruption when Dr Asim Hussain had been heading the petroleum ministry during the PPP government. A majority of questions were pertaining to the award of contracts by the oil and gas companies.

Published in The Express Tribune, January 27^th, 2016.

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