The Ministry of Finance and Oil and Gas Regulatory Authority (Ogra) have expressed reservations about a $30 billion integrated liquefied natural gas (LNG) project to import 800 million cubic feet per day (mmcfd) of gas that may favour a couple of private companies.
The finance ministry was of the view that the petroleum ministry’s proposed LNG import plan would require relaxation of Public Procurement Regulatory Authority (PPRA) rules, which may favour private firms involved in import.
Under the plan, each LNG company will import 400 mmcfd of gas for 10 years. The price of gas will be reviewed after five years.
According to sources, the petroleum ministry had sent a summary to the Economic Coordination Committee (ECC), seeking approval for award of LNG import contract to two companies through bidding. However, the finance ministry opposed the plan, terming it a violation of PPRA rules.
A government official claimed that the two private companies – one of Turkey and another of South Korea – were being reportedly backed by sitting ministers and one retired bureaucrat.
The Turkish firm wants payment guarantees from the government and purchase of LNG by state-owned gas companies, which violate LNG Policy 2011.
“Now, the government has prepared a plan to select these two firms by issuing tenders after approval of ECC,” the official said, adding the companies would also be given guarantees.
In the summary, the petroleum ministry also requested that the government and private importers should be allowed to make spot purchases of LNG from South Korea, Malaysia and Qatar, but that would require relaxation of PPRA rules.
The ministry also called for striking a deal with Qatar, Korea and Malaysia on government-to-government basis.
However, the finance ministry argued that bids of two firms for one project could not be accepted as it was in violation of PPRA rules.
Sources quoted finance ministry officials as saying that the government would strike long-term deals for LNG import with private firms, so PPRA rules required qualification of one company with no provision for spot purchases.
In its arguments, Ogra said the petroleum ministry had not devised any criteria to evaluate the bids of participating firms before the award of contract to them.
Commenting on the matter, Petroleum Minister Dr Asim Hussain said there was a proposal to award the contract to two companies as the government wanted to import LNG in large quantities to meet the country’s needs. Terminals would also be set up by these companies and total cost of the project would be over $30 billion, he said, adding the country would benefit from the spot purchase of LNG.
“Private firms may be allowed spot purchase of LNG if they want to sell it to private clients,” he said, adding the government may also buy gas if they provide it at lower-than-agreed price in the long-term contract, especially in winter season.
Ruling out any favour to the companies, Hussain said the government wanted to import gas on a fast track and those companies would be qualified that would provide it in the short term.
Another official of the petroleum ministry said the ministry was seeking general approval for LNG import and a high-level committee comprising finance secretary and petroleum secretary would be constituted to set criteria to evaluate the bids of private companies.
Published in The Express Tribune, April 15th, 2012.