Uch-2 gas field project: OGDC scraps Kahuta Research Laboratories’ contract

State-run company fails to implement project.

ISLAMABAD:

The Oil and Gas Development Company Limited (OGDC) has scrapped $186 million Uch-2 gas field contract awarded to state-run Kahuta Research Laboratories (KRL) who failed to initiate the project.

KRL not only failed to implement the project after negotiating the deal, but also recommended to award the contract to Frontier Works Organisation (FWO) that had expertise in building road infrastructure.

The Economic Coordination Committee (ECC) had given a go-ahead to KRL without a bidding process by scrapping a tender in which Petrosin was the lowest bidder.

Sources told The Express Tribune that OGDC’s board of directors meeting held on August 12 decided to implement the project itself and accorded approval to award a consultancy contract to Enar, a public sector firm.

The country’s largest oil and gas explorer scrapping the contract twice has caused serious concerns for investor who have committed $480 million in Uch-2 power plant with 408 MW power generation capacity, which will be built following Uch-2 gas field.

International Power has signed Gas Sales Agreement (GSA) with OGDC to receive gas from Uch-2 gas field for Uch-2 power plant.

International Power is already operating Uch-1 power plant of 586MW generation capacity. The Uch field produces low quality gas that can be utilised only for power generation.

International Power has received commitment of a $400 million loan from Asian Development Bank (ADB), International Finance Corporation (IFC), Islamic Development Bank (IDB) and Korean Exim Bank that are seeking a timeframe about completion of Uch-2 gas field project to supply gas to power plant. Lenders are concerned about delay in initiation of work on Uch 2 gas field that may also affect Uch 2 power plant project.

However, OGDC has provided a letter to International Power ensuring a supply of gas for Uch-2 power plant in time but lenders are more concerned about time frame.

Apparently work on different fields of OGDC is being delayed due to a tussle between different groups that are trying to get the multimillion dollars contracts of OGDC, sources say.





Published in The Express Tribune, August 21^st, 2011.