US agency proposes long-term LNG import deal

OPIC wants Pakistan to go for 15-year agreement rather than for 10 years.

ISLAMABAD: Overseas Private Investment Corporation (OPIC), an agency of the US government, has proposed that Pakistan should strike $30 billion LNG import contract on long-term basis to secure financing from international lenders.

OPIC is the US government’s development finance institution that assists businesses to invest overseas and helps solve critical development challenges and in doing so, advance US foreign policy.

Earlier, OPIC and World Bank’s affiliate International Finance Corporation (IFC) had also committed $370 million financing to local firm 4Gas for Mashal LNG project, which includes establishing a terminal at Port Qasim.

A senior official of the petroleum ministry said that a summary relating to LNG import project was being revised in light of OPIC proposals.

“OPIC has proposed to ink LNG import deal with supplier for fifteen years and revise gas price after every ten years,” an official said adding that this proposal will now be tabled before the Economic Coordination Committee (ECC) for formal approval. Earlier, the petroleum ministry had proposed to strike a deal of LNG import for ten years and price revision after every five years.

The Ministry of Petroleum wants to award LNG import contract to two companies for import of 800 million cubic feet per day (mmcfd) LNG through bidding process.

However, a finance ministry official termed the LNG import plan against Public Procurement Regulatory Authority (PPRA) rules and said that relaxation of rules will favour blue-eyed private firms. The Finance ministry says that acceptance the bid of two firms for one project was in violation of PPRA rules.

Under the government-backed integrated LNG import project, private firms will be given a guarantee that was one of the key demands tabled by Turkish-based firm Global Energy. Oil and Gas Regulatory Authority (Ogra) has also alleged that the criteria to qualify bidders was not being tabled before the ECC, a move that could let private parties influence the government in finalising the importers.

In the ECC summary, the petroleum ministry is also seeking the cabinet body’s nod to allow private developers to make spot purchases of LNG from Korea, Malaysia and Qatar which will require relaxation of PPRA rules. The petroleum ministry has also pleaded to strike deals with Qatar, Korea and Malaysia on government-to-government basis.

“Spot purchases will also mean a violation of PPRA rules,” an official said quoting finance ministry authorities. They said that the government would strike long-term deals of LNG import with private firms and therefore, PPRA rules required qualifying one firm, a policy that coincides with spot purchases.

An official of the petroleum ministry requesting anonymity said that the government wanted to import LNG in large quantity to meet requirements of the country and therefore two firms were proposed to award contract.

He said that terminals would also be set up by private firms and total cost of the project would be over $30 billion. He also said that country would benefit the spot purchase of LNG.

He claimed that the government would allow private firms to import LNG on spot purchase if they wanted to sell it to private clients. He also ruled out favouring to any private LNG firm and said that government wanted to import gas on fast-track basis and those companies would qualify that would provide the product swiftly.

Published in The Express Tribune, May 5^th, 2012.