Talking business

Oil and gas circles are abuzz about what they’re calling a “preferred party” that has walked out of the woodwork, so to speak, and into the bidding process to build a Liquefied Natural Gas (LNG) terminal in Port Qasim.

There’s lots of talk about lack of transparency regarding bid evaluations, accelerated government approvals for the so-called “preferred party,” facilitation to build a buyers consortium consisting of a handful of large power plants in Punjab. The whole process to select the first party to build the LNG terminal is being described as a Turkey shoot with the difference that in this case, it’s the Turkey that’s doing the shooting!

But as with all such affairs, there is no smoking gun. Nor is there likely to be. The entire narrative about a “preferred party” in fact rests on two concrete incidents. One is an exceptionally fast approval from Ogra for a construction license. The second is an Environmental Impact Assessment that industry insiders say ought never to have passed muster, especially considering final site approvals are not yet in. “How can you do an environmental impact assessment when you don’t even know the site where they will build the terminal?” asks an industry insider.

But high officials of the Petroleum Ministry are quick to rubbish such talk. They speak of an “open access” policy, saying anyone is free to submit an EoI, and all parties will be given due consideration. They point out that the LNG Policy of 2006, under which the entire affair is unfolding, has a provision for “one window” facilitation to investors interested in setting up an LNG terminal in Pakistan. If there is a party out there that is availing this benefit, they point out, then others are also free to step forward and expect it in their turn. None, they add, has stepped forward to ask for “one window facilitation.”

Moreover, they point out that arranging gas supplies is becoming increasingly urgent, a point underlined by the growing acrimony in the gas allocations talks, with large textile parties mobilizing the courts, and APTMA making noises of strikes, shut downs and legal action of their own. “We should all share the shortage, no sector is entitled to expect that all its needs will be met, we all should shoulder the burden of the shortages,” says APTMA chief Gohar Ejaz.  As the wrangling for gas quotas picks up steam, high officials at the Petroleum Ministry say there is no time to be wasted. The party with the fastest timeline wins in this case, and they’re setting a deadline of second quarter 2012 for the terminal to become operational.

Problem is, however, that they’ve failed to put the dead in deadline.  The invitation for EoI’s stipulates no penalties should the parties fail to meet the deadline, an opening charlatans can exploit to get their foot into the door, then muddle through till commissioning. Not all parties submitting EoI’s are comfortable competing in this charlatans gambit, there is no way - they argue - that anyone can commission an LNG terminal by second quarter 2012, so what’s the point of placing such an artificial deadline on the whole affair?

And that’s not all. No criteria have been announced against which EoI’s will be evaluated. In fact they’ve only just advertised for a consultant who will be asked to draw up the evaluation criteria. So why invite bids before the evaluation criteria are in hand? How do you draw up an EoI when you don’t know basic things about the process, such as whether a long-term supply contract is required or not (LNG policy 2006 stipulated a 20 year supply contract), who the buyer will be, and what third party framework will govern access to SSGC’s pipeline capacity?

It might be an idea for Ministry Petroleum to take some of this grumbling into consideration. After all, setting up an LNG terminal is not exactly a “fax-me-a-quotation” type of proposition. The matter is urgent, no doubt, but haste could open the door to charlatans more interested in upstream trading than efficient provision of gas to upcountry buyers. And that would be bigger shame than a few months lost in transparently vetting the EoI’s for seriousness of purpose.

the writer is Editor Business and Economic policy for Express News and Express 24/7

Published in The Express Tribune, July 11^th, 2011.