PML-N govt stopped process for building third LNG terminal

ECC declared PQA site unsafe while scrapping bidding process

ISLAMABAD: The previous government of Pakistan Muslim League-Nawaz (PML-N), whose tenure ended on May 31, 2018, stopped the Port Qasim Authority (PQA) from going ahead with bidding for the allocation of a site for constructing third liquefied natural gas (LNG) terminal in Karachi, a step that would give monopoly to Engro Elengy Terminal Limited in the private sector.

According to documents, a week before bidding for the award of a site to private developers of LNG terminal, the bidding process was cancelled. Final date for the submission of bid documents was March 19, but the process was cancelled on March 14 by the PQA on the federal government’s directive.



Later, the Economic Coordination Committee (ECC) of the cabinet, chaired by then prime minister Shahid Khaqan Abbasi, considered the issue and decided that only those sites at Port Qasim would be allocated for setting up LNG floating terminals that had been declared safe after undertaking a quantitative risk assessment.

The cabinet, in its meeting held on last day of the PML-N government, also approved recommendations of a committee constituted by it earlier for constructing LNG terminals at Port Qasim and referred the matter to the PQA board of directors for further consideration and implementation.

Officials familiar with the development told The Express Tribune that the PQA had floated a tender for allocating site ‘B’ through competitive procedures, but the ECC declared the site unsafe for terminal building and halted the process. While taking the decision, the ECC bypassed the PQA board of directors.

Later, the cabinet on May 31 put the onus on the PQA board whether the project site should be shifted or the same site should be chosen for building the third LNG terminal. The cabinet also decided that a uniform tariff would be applied at all sites to be allocated for new LNG terminals.



Already, two LNG terminals are being run in the country - one by Engro Elengy and the other by Pakistan GasPort Limited. Engro has planned to expand the capacity of its existing terminal, but for that it requires demand from the market.

It had also conducted a study on PQA’s A, B, C and D sites for constructing the LNG terminal, which declared all the sites safe. Later, the PQA floated a tender for site B based on the study. However, the outgoing government disrupted the process.

Engro wants to collect between 50 and 80 US cents in tolling fee from the private industry for handling LNG imports while Pakistan GasPort Limited is collecting a lower fee of 41.77 cents. This difference means an additional receipt of around $1 million per cargo.



This was the major reason why the PML-N government scrapped the bidding process that would give virtual monopoly to the existing player. However, competition would definitely have benefitted the consumers.

Published in The Express Tribune, June 6^th, 2018.

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