Legal speed bump: SSGC fears new LNG import project may come to a halt
Suggests settlement with 4Gas to push ahead with the project.
ISLAMABAD:
Sui Southern Gas Company (SSGC) has expressed fears that a new initiative to import liquefied natural gas (LNG) may come to a halt because of fierce opposition from Dutch firm 4Gas, who was originally awarded the Mashal LNG import project.
In a communication to the Economic Coordination Committee (ECC) of the cabinet, SSGC has suggested that the Mashal project should be referred to the attorney general for settlement with 4Gas before undertaking the new integrated LNG import project, which would be tabled before the ECC scheduled to meet today (Tuesday).
The Ministry of Petroleum and Natural Resources has sent a summary to the ECC, proposing import of one billion cubic feet of LNG per day in a fresh programme to meet pressing energy needs.
The multi-billion-dollar Mashal project had been stalled following the law ministry’s call to reissue the tender. However, 4Gas termed the ministry’s advice ‘flawed’ and said now a new team was working in the ministry, so fresh advice should be sought.
“SSGC is of the view that the new initiative may come to a halt due to the Mashal LNG project, therefore, the opinion of the law ministry should be sought before pushing ahead with the new project,” said a source quoting the SSGC communication in the ECC meeting held on August 7.
According to sources, the federal government had earlier asked SSGC to convey the cancellation of Mashal project, but the company did not do so, fearing legal complications as 4Gas had warned that it would approach the international court if a new project got under way.
In Tuesday’s meeting, the ECC will seek briefing from the minister for law and justice about possible litigation by 4Gas, which has written a letter to ECC Chairman Dr Abdul Hafeez Shaikh, saying it would file a case in the international court.
Talking to The Express Tribune, a senior official of the petroleum ministry said the law ministry’s opinion that a fresh tender should be floated for the Mashal project was valid and no recommendation would be sought from the attorney general.
A sub-committee, constituted by the ECC, has proposed phased import of LNG. Under long-term projects, 400 million cubic feet per day (mmcfd) of LNG should be imported in the first phase and the same quantity in the second phase. Separately, the committee has recommended import of 200 mmcfd on fast track from international sources through direct negotiation, competitive bidding or spot purchases.
US government agency Overseas Private Investment Corporation (OPIC) has proposed a long-term deal for 15 years with a gas price review after 10 years. However, the ECC sub-committee wants to strike deal for 10 years with price review after every five years.
The gas price will be determined on the basis of weighted average selling price. Gas distribution and power companies will open back-to-back letters of credit for LNG imports. Gas firms will open revolving standby letters of credit for up to three months while LNG consumers – mainly the power companies – will open the same LCs to back up LCs of gas companies.
Published in The Express Tribune, October 2nd, 2012.
Sui Southern Gas Company (SSGC) has expressed fears that a new initiative to import liquefied natural gas (LNG) may come to a halt because of fierce opposition from Dutch firm 4Gas, who was originally awarded the Mashal LNG import project.
In a communication to the Economic Coordination Committee (ECC) of the cabinet, SSGC has suggested that the Mashal project should be referred to the attorney general for settlement with 4Gas before undertaking the new integrated LNG import project, which would be tabled before the ECC scheduled to meet today (Tuesday).
The Ministry of Petroleum and Natural Resources has sent a summary to the ECC, proposing import of one billion cubic feet of LNG per day in a fresh programme to meet pressing energy needs.
The multi-billion-dollar Mashal project had been stalled following the law ministry’s call to reissue the tender. However, 4Gas termed the ministry’s advice ‘flawed’ and said now a new team was working in the ministry, so fresh advice should be sought.
“SSGC is of the view that the new initiative may come to a halt due to the Mashal LNG project, therefore, the opinion of the law ministry should be sought before pushing ahead with the new project,” said a source quoting the SSGC communication in the ECC meeting held on August 7.
According to sources, the federal government had earlier asked SSGC to convey the cancellation of Mashal project, but the company did not do so, fearing legal complications as 4Gas had warned that it would approach the international court if a new project got under way.
In Tuesday’s meeting, the ECC will seek briefing from the minister for law and justice about possible litigation by 4Gas, which has written a letter to ECC Chairman Dr Abdul Hafeez Shaikh, saying it would file a case in the international court.
Talking to The Express Tribune, a senior official of the petroleum ministry said the law ministry’s opinion that a fresh tender should be floated for the Mashal project was valid and no recommendation would be sought from the attorney general.
A sub-committee, constituted by the ECC, has proposed phased import of LNG. Under long-term projects, 400 million cubic feet per day (mmcfd) of LNG should be imported in the first phase and the same quantity in the second phase. Separately, the committee has recommended import of 200 mmcfd on fast track from international sources through direct negotiation, competitive bidding or spot purchases.
US government agency Overseas Private Investment Corporation (OPIC) has proposed a long-term deal for 15 years with a gas price review after 10 years. However, the ECC sub-committee wants to strike deal for 10 years with price review after every five years.
The gas price will be determined on the basis of weighted average selling price. Gas distribution and power companies will open back-to-back letters of credit for LNG imports. Gas firms will open revolving standby letters of credit for up to three months while LNG consumers – mainly the power companies – will open the same LCs to back up LCs of gas companies.
Published in The Express Tribune, October 2nd, 2012.