Left out: 4Gas may sue govt for starting new LNG project

Dutch firm fearing loss of its stake proposes to seek fresh advice from the law ministry.

Zafar Bhutta August 06, 2012


The developer of the stalled Mashal LNG project, Netherlands-based firm 4Gas may sue the government if it decides to reinitiate the LNG import project from scratch.

The petroleum ministry has moved a summary to the Economic Coordination Committee seeking approval to start LNG integrated import project all over again, which would mean selecting suppliers through a new tender.

4Gas is the successful bidder for developing Mashal LNG project under an integrated projects structure and the contract still remains intact as it was neither revoked by the Supreme Court nor cancelled by the Economic Coordination Committee (ECC), 4Gas CEO said in a in a letter to ECC Chairman Dr Abdul Hafeez Sheikh, a copy of which is available with The Express Tribune.

Under the Mashal project, ECC awarded a contract for import of 3.5 million cubic feet of LNG per annum to French company GDF-Suez and Dutch firm 4Gas. But the petroleum ministry did not table proposal of another interested party – Vitol/Fauji Foundation consortium – in the meeting, which sparked controversy and the case landed in the Supreme Court.

Later, the government decided in February 2011 to re-float tenders for the Mashal project, but a petition, filed in the Supreme Court challenging the invitation of fresh bids, blocked the move.

He said that the court took exception only to the unbundling of the Mashal LNG Project and did not question selection of 4Gas as developer of the Mashal project.

“Neither had it (court) ordered 4Gas to become party to the suo motu proceedings nor revoke ECC decision in February 2010 to award development of LNG terminal to 4Gas,” he said.

“We hope we are not compelled to litigation in pursuit of our claim and recovery of costs as a result of any decision which is arbitrary and lacking due process,” 4Gas head. The Mashal LNG project tender was won through a four-year long tender process in full compliance of the PPRA rules and endorsed by the Supreme Court.

4Gas has reiterated readiness to implement Mashal LNG project within framework of the Supreme Court decision. 4Gas Chief Executive Officer said that they had proposed a number of suggestions to proceed the matter but neither their point of view nor suggestion had been brought to the attention of the ECC meeting held on May 15, 2012 when it considered the LNG import project.

The delay in Mashal LNG project has caused a loss of $3.6 billion to Pakistan’s exchequer on the back of price difference between LNG and furnace oil, said head of 4Gas said adding should give irrevocable go-ahead to 4Gas Asia-IFC (World Bank) consortium to get started with the Mashal LNG project. 4Gas has spent $12 million since participation in the Mashal tender process in May 2006, according to the official.

He requested the matter to be placed before the law ministry for a fresh review of the earlier advice regarding retendering of Mashal LNG project. He urged the government that the sanctity of internationally tendered Mashal LNG project be maintained and assurance should be given that 4Gas status as the developer declared qualified in the Mashal project tender process will not be compromised.

The Supreme Court of Pakistan disposed of suo motu case on April 28, 2010 on assurance given by the then premier through the counsel that the government would table a summary relating to the Mashal project before ECC for a fresh decision of awarding the contract for supply of LNG to 4Gas, the developer declared qualified by the consultant of Sui Southern Gas Company.

“4Gas offer remained valid and was reiterated in a meeting with the Prime Minister on January 13, 2011 by a delegation comprising of 4Gas shareholders. Thereafter, we received no communication from the government of Pakistan as to any decision taken in respect of Mashal Project except verbal assurances followed by letter from Secretary Ministry of Petroleum dated 13 January 2012 stating that matter had been up taken again with Ministry of Law,” he said.

Published in The Express Tribune, August 7th, 2012.

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