Plan in the doldrums: Finance ministry resists backing LNG imports

LNG is being imported to cope with gas shortages during the winter season.

ISLAMABAD:

The liquefied natural gas (LNG) imports project is still in the doldrums as the finance ministry is resisting extending sovereign guarantees for the project due to financial constraints.

The Economic Coordination Committee (ECC) approved import of one billion cubic feet per day (bcfd) of LNG in an attempt to cope with the shortage of gas in the country, particularly in winter season. LNG suppliers want the government to give guarantees as the circular debt issue plaguing the country has made this a risky affair for suppliers to jump in. However, sources said that the  finance ministry was still reluctant to extend guarantees.

A high-level meeting was held, chaired by the Adviser to the Prime Minister on Petroleum and Natural Resources Dr Asim Hussain to discuss the modalities of LNG import projects. The meeting was also attended by Minister of State for Finance Saleem Mandviwalla, Secretary Petroleum Dr Waqar Masood Khan, Sui Southern Gas Company (SSGC) Managing Director Zuhair Siddiqui, member of Planning Commission of Pakistan Shahid Sattar, Senior Joint Secretary Ministry of Law Dr Riaz Mahmood, State Bank of Pakistan Director Mansoor Siddiqui, representatives of the finance ministry, senior officers of SSGC and the Ministry of Petroleum and Natural Resources.

During the meeting, a representative of the Planning Commission agreed with the criteria of LNG price revision. The meeting was informed that a long-term contract of LNG supply will be signed for five years, whereas the price will be reviewed after every five years.

Meanwhile according to statement, Hussain said that LNG imports were essential to overcome the energy shortfall and will also help in improving the economy.

SSGC, while briefing the meeting regarding LNG Integrated Project’s Request for Proposal, said that the LNG bidding process will be a through two-envelope system which means that technical and financial proposals will be sought.

Detailed discussions were held on various aspects of LNG import including quantity, bidding process, timelines, bid security and performance bond, credit structure, sovereign guarantees, evaluation of bids and gas sale purchase agreement terms.

It may be re-called that ECC in its meeting on August 7, 2012 approved the short and long term LNG Import Framework proposed by the Ministry of Petroleum and Natural Resources. However, the ECC formed a technical group comprising to work further on mechanism, bidding details, guarantee matters and legal issues.

Published in The Express Tribune, November 22^nd, 2012.