Chain effect: Pakistan may lose foreign investment in power sector

Court stay order bars OGDCL from awarding a contract to Kahuta Research Laboratories.

ISLAMABAD:

Amid burgeoning energy crisis, Pakistan may lose foreign investment of $480 million in the power sector after a parliamentarian from the ruling party obtained a stay order from Islamabad High Court barring Oil and Gas Development Company Limited (OGDCL) to award engineering procurement and construction contract to state-owned organisation Kahuta Research Laboratories (KRL).

Officials are of the view that the president as well as the prime minister should take notice to resolve the stay order issue that was delaying work on Uch-2 gas field which is dedicated to supply gas to 408MW Uch-2 power plant, a project that will bring foreign investment to the tune of $480 million.

Sources maintained that the petroleum ministry had requested the parliamentarian from the ruling party to withdraw the case in court with the assurance that the contract would not be awarded to KRL for more than $186 million cost, the lowest bid submitted in the tender phase that was scrapped due to disassociation of the bidder with its partners. The case has not been withdrawn from the court so far and OGDCL as well as the petroleum ministry are in a fix on how to proceed on the project, sources added.

Economic Coordination Committee (ECC) has already approved to award the contract to strategic partner KRL in a bid to avoid any further delay in the Uch-2 gas field project. KRL is committed to implementing the project at cost of $186 million within 18 months.

International Power has signed a Gas Sales Agreement (GSA) with OGDCL to get supply from Uch-2 gas field and supply it to its Uch-2 power plant. International Power is already generating 586MW from Uch-1 power plant. The Uch field produces low quality gas that can be utilised only for power generation.

International Power has received a commitment of $400 million loan from Asian Development Bank, International Finance Corporation, Islamic Development Bank and Korean Exim Bank that are seeking timeframe about completion of Uch-2 gas field project to supply gas to its power plant, sources said adding that lenders are concerned about the delay in initiation of Uch-2 gas field work. International Power plans to finance $80 million from its own reserves. Sources said that the contractor was being mobilised to start work on Uch-2 power plant. OGDCL has provided a comfort letter to International Power that ensures gas supply to Uch-2 power plant in time, sources maintained.

Sources also said that a high level delegation led by International Power Asia region president recently visited Pakistan and took up the delay issue with the concerned ministries. The Asia region president had also conveyed the concerns of lenders over delay in the gas field project.

Published in The Express Tribune, July 9^th, 2011.