Power play: Petroleum ministry stands ground on LNG project

Published: December 6, 2010

Ministry says ‘best offer’ will be lost if govt does not act; delay in awarding contract has already caused $1b loss.

ISLAMABAD: The ministry of petroleum and natural resources and the law ministry are at loggerheads over a multi-billion dollar liquefied natural gas (LNG) import project.

The petroleum ministry says the law ministry’s opinion to re-tender the strategic venture is contrary to the Supreme Court judgment and the delay in awarding the contract has already caused a loss of over $1 billion to the national exchequer.

Talking to The Express Tribune, Petroleum and Natural Resources Minister Naveed Qamar said, “The Supreme Court in its judgment neither cancelled the project nor asked for re-advertising”.

Qamar said the LNG import project became “controversial on flimsy claims of losses” in the process of awarding the contract to a French company GDF Suez. That was not proved but ironically due to the controversy the “country has suffered well over $1 billion loss” on account of using expensive furnace oil for electricity production, said Qamar.

“The Supreme Court categorically asked to take the project summary again in the Economic Coordination Committee (ECC) and let it look at the process; if it decides the process is transparent then [the project is to] go ahead,” he added.

He said, “The ECC asked the ministry of law only to look at whether the LNG project summary complied with the SC decision or not. We also obtained independent legal opinion, which endorsed that our ministry’s summary was in compliance with the SC judgment”.

“The law ministry has taken a position to retender the project, which is not in accordance with the Supreme Court decision,” Qamar said.

The government awarded the 3.5 million tonne LNG import project to GDF-Suez on February 9. In March, a news report claimed a $1 billion dollar loss in the deal, prompting the SC into taking suo motu notice. The apex court did not find any loss and asked the government to review the decision. The ECC then asked the law ministry to check whether the petroleum ministry’s summary was in compliance with the judgment that in turn rather advised to re-tender the whole process.

On the other hand, the LNG project handler, the 4Gas stakeholders have already threatened to withdraw their offer to supply the gas if Pakistan did not take a decision before November 30.

“Carlyle (the 4Gas stakeholder) has given us notice that they have an interest in this project only up to November 30. The deadline has already passed and before contacting Carlyle we intend to have a discussion in the ECC to decide one way or the other on how the project is to be dealt with”, said Qamar adding, “based on what the ECC decides, we will move forward”.

The government had convened the ECC meeting on December 7th but due to Naveed Qamar visit to Turkey with Prime Minister Gilani the meeting was postponed.

Qamar said till the time the project materialises Pakistan will have to rely on expensive furnace oil for power generation or consider the other option of shutting the plants.

Qamar said the SC did not even look at the basic (bone of) contention, the loss of $1 billion dollar due to award of contract to GDF-Suez, as had been reported in the media. According to reports, GDF-Suez’s offer was way below the Vitol/Fauji offer. The matter has already been resolved in the National Assembly standing committee on petroleum where it was proved that it was not a loss rather a saving of $1 billion.

Secondly, the Vitol/Fauji offer was an integrated project where the government bid was for supply. The SC had asked to separately look into the Vitol/Fauji offer.

Qamar said that his ministry was submitting two summaries in the ECC; one was for Vitol/Fauji offer where it is asking the ECC if it wanted to accept or re-tender. The second summary is for 4Gas offer as a bundle offer, asking the ECC whether to award the contract or not. In the earlier government decision, the 4Gas company was the handler and GDF-Suez was the supplier. The SC had asked the government to get a bundled offer; the 4Gas company has accepted the responsibility of being the supplier too.

Qamar said the international companies involved in the deal are well reputed and their reputation was at stake due to delay in the decision. They all know that Pakistan was an energy-deficient country. He said the international players, the US and the French governments have been involved in securing the deal for their companies. “Nowadays it is the economic diplomacy that is at work. They have backed these companies,” he added.

“On the one hand, we ask countries to bring in investment and resolve Pakistan’s energy problems, but when they come, participate in bidding, put the best offer on the table, we reject their offer due to flimsy reasons,” he said.  “It is their right at least to agitate.”

Published in The Express Tribune, December 6th, 2010.

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