Multi-million dollar contract: Gunvor wins LNG deal race, will be PSO’s supplier

Commodities groups disqualified on technical bid; uncertainty on cost remains.

KARACHI:

Pakistan State Oil (PSO) on Friday awarded a multimillion-dollar contract for three liquefied natural gas (LNG) consignments to the world’s fourth largest commodities group, Gunvor, raising several eyebrows, said officials.

Gunvor – a privately owned company – was among nine trading houses that submitted bids in response to PSO’s May 13, 2015, tender-seeking supply of LNG in four separate shipments of 143,000 cubic metres each.

The PSO spokesman said the tender is valid till June 29 and claimed that it has not been awarded yet. However, the spokesperson
confirmed that all other participants were disqualified.

Participation of nine trading firms, which also included commodities giant Vitol, Glencore, Trafigura, Marubeni and the US-based Excelerate Energy, showed unprecedented interest towards a new entrant in the market, according to traders.

Vitol, Glencore and Trafigura are bigger trading houses than Gunvor in terms of revenue and business.

“This kind of participation was a very good sign for Pakistan. It offers an opportunity to get the right price,” said a representative of one of the trading houses. “Unfortunately, this is not how things work in our country.”

Scepticism of losing participants stems from the fact that all of them, except for Gunvor, were disqualified on technical grounds on Thursday night.

What constitutes a tender?

Tender for supplying anything to a government organisation is submitted in the shape of technical and financial bids.

The technical bids basically establish credentials of the bidder and see if tenders requirements have been met. Financial bid deals with the cost at which the bidder is willing to provide the supplies.

If for any reason a bidder is technically disqualified, the accompanying financial bid is also discarded.

Technical bids were opened up in front of representatives of all the participating suppliers on June 15.

“There were two categories of discrepancies – major ones included cases where a bid bond was missing. But minor discrepancies consisted of really trivial omissions like a missing stamp on one of the pages,” said a trader.

“PSO said it was going to evaluate and then let us know who will be qualifying for the final round. Everyone except for one was disqualified.”

While PSO has the power to sideline any bidder who fails to meet any of the tender requirements, the fact that no one knows who actually offered the lowest price for LNG is bound to haunt the management in the coming weeks.

An industry official close to the process said PSO needed at least one other bid to compare it with what Gunvor had offered. “It’s not the company, which is going to pay for this LNG. It’s the people who will bear the cost. And we’ll never know if we have gotten a fair deal.”

PSO wants the cargos to be delivered every month between July and October of this year. However, Gunvor did not opt for the July delivery.

Pakistan began importing LNG last March after a private company built a terminal at Port Qasim. Up till now, the government has imported five LNG shipments from Qatar.

Published in The Express Tribune, June 20^th, 2015.

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