ECC puts off decision on award of LNG terminal contract

Petroleum ministry had sought approval to overcome energy shortages

ISLAMABAD: The Ministry of Petroleum and Natural Resources has sought approval of the Economic Coordination Committee (ECC) for the award of second LNG terminal contract to the successful bidder in what is termed an immediate solution to the growing energy shortfall that is impeding economic growth, officials say.

The government is setting up three power plants in Punjab based on liquefied natural gas (LNG) with total generation capacity of 3,600 megawatts and they need 600 million cubic feet of gas per day (mmcfd).



The second LNG terminal will handle the volume of 600 mmcfd to meet needs of the power plants and help eliminate electricity outages in the country.

The petroleum ministry placed a summary for setting up the second LNG terminal before the ECC in its meeting on Tuesday. However, the matter was deferred and it would be tabled again in the next huddle for further discussion.

The ministry told ECC members that Pakistan was facing a severe shortage of natural gas both for electricity producing plants and for consumption by other sectors.

Domestic gas production amounting to 4 billion cubic feet per day (bcfd) cannot meet the country’s demand, which is around 2 bcfd more than the supply and is continuously rising. This shortage is not only causing hardships for the people but is also hurting economic growth of the country.

Keeping this in view, the government is pursuing import of LNG to minimise the gas deficit.

In an attempt to take immediate measures, the petroleum ministry had earlier prepared a summary in October 2015 for ECC’s approval. It suggested in the summary that Government Holdings Private Limited (GHPL) should be allowed to build the second LNG terminal at Port Qasim with a handling capacity of 500 mmcfd under tolling arrangements and through open competitive bidding. It was also proposed that GHPL may establish a subsidiary for setting up the LNG terminal.

However, in Tuesday’s meeting the ECC was told that state-run Pakistan LNG Terminal Limited (PLTL) had been incorporated under the Companies Ordinance 1984 with a mandate to set up an LNG terminal.



The company invited proposals and published an advertisement for setting up the second LNG terminal for storage and re-gasification at Port Qasim. It received two bids - one from Pakistan GasPort Limited and the other from Akbar Associates Limited.

Their technical bids were evaluated by PLTL’s consultant Galway Group and Akbar Associates was technically disqualified whereas Pakistan GasPort was declared the successful bidder.

Consequently, discussions for an operation and services agreement were held with Pakistan GasPort and the accord was reached in accordance with the Request for Proposals for LNG services or rules of the Public Procurement Regulatory Authority (PPRA).

PLTL board of directors, in its 12th meeting on June 7, 2016, approved the operation and services agreement pertaining to the handling of LNG and operation of services infrastructure.

According to the financial bid evaluation report, Pakistan GasPort will receive $0.4177 per million British thermal units (mmbtu) in levellised service fee for handling 600 mmcfd and will ensure availability of 96% of the gas volume.

The petroleum ministry requested the ECC to approve the agreement and convey the decision to the Oil and Gas Regulatory Authority as a policy guideline.

Published in The Express Tribune, June 16^th, 2016.