Planning Commission: Body steers clear of LNG import project

Asks govt to hire independent consultant to assess its feasibility.


Zafar Bhutta June 08, 2012

ISLAMABAD:


The liquefied natural gas (LNG) import project has hit a stumbling block as the Planning Commission has refused to extend blind support and asked the government to hire an independent consultant to assess the feasibility of the $30 billion project before moving ahead.


“There are many flaws in the integrated LNG import programme (including a terminal and gas supplies), but the sub-committee, formed for the purpose in mid-May, has held only one meeting so far,” a senior official of the Ministry of Petroleum and Natural Resources said.

“Now the Planning Commission has come up with a demand that an independent study should be conducted by a consultant to determine the viability of the project,” the official said.

Earlier, Special Adviser to the Prime Minister on Water Resources Kamal Majidullah, who is a member of the sub-committee, opposed the integrated LNG import project and asked the government to push private parties that are already working on LNG import.

So far, four private parties have got construction licences from Ogra for an LNG terminal.

The finance ministry, Public Procurement Regulatory Authority (PPRA) and Oil and Gas Regulatory Authority (Ogra) had also rejected the integrated LNG import project, the official said.

The sub-committee was constituted by the Economic Coordination Committee (ECC) in its meeting on May 15 and Information Technology Minister Raja Pervez Ashraf was made the chairman to look into modalities of the LNG import project. The sub-committee immediately held a meeting on May 16 during which the finance ministry refused to extend sovereign guarantees for LNG import.

The special adviser to the prime minister on water resources was of the view that the integrated project would hinder the progress of other LNG import projects as happened in the Mashal LNG import project.

Some quarters believe that the petroleum ministry had asked Sui Southern Gas Company (SSGC) to initiate a short-term LNG import project that stalled the Mashal programme.

Overseas Private Investment Corporation (OPIC), a US government agency, has also supported the integrated LNG import project and wants to ink deals with the suppliers for 15 years and revision of gas price after every 10 years.

The petroleum ministry wants to award contract for the integrated project through bidding to two firms for import of 800 million cubic feet per day (mmcfd) of LNG. Each party will be given a supply contract of 400 mmcfd.

But the finance ministry has raised questions over the plan, terming it against PPRA rules as the contract can only be awarded to the lowest bidder.

The ministry was of the view that acceptance of bids of two firms for one project would violate PPRA rules and the relaxation in rules would favour some private firms involved in import.

On its part, Ogra has alleged that the criteria to qualify bidders were not made part of the summary of ECC and therefore private parties could influence the government in finalising the criteria later.

The petroleum ministry also wants to seek approval to allow private developers to make spot purchases of LNG from South Korea, Malaysia and Qatar, which will require relaxation of PPRA rules. The ministry has called for striking a deal with Qatar, South Korea and Malaysia on government-to-government basis.

Defending the project, an official of the petroleum ministry said the government wanted to import LNG in large quantities to meet requirements of the country and for that reason two firms were proposed to be awarded the contract.

He said terminals would also be set up by private firms and total cost of the project would be over $30 billion, adding the country would benefit from spot purchases.

He denied favouring any private LNG firm, saying the government wanted to import gas on a fast track and those companies would qualify that would provide the commodity swiftly.

Published in The Express Tribune, June 9th, 2012.

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