Govt rejects lowest bid for LNG import project, for a third time

Controversy continues as evaluators term the bid ‘non-compliant’.

Our Correspondent March 06, 2013
The amount involved in the LNG import project is roughly one-fifth of the total size of the national economy. PHOTO: FILE


The $46 billion (Rs4.5 trillion) Liquefied Natural Gas import project has become controversial, for the third time again, after a subsidiary of Engro Corporation submitted the lowest financial bid, which the evaluators think to be “non-compliant”.

The dispute has given voice to allegations that the government was favouring the second lowest bidder and wanted to knock out the lowest bid and award the deal to the favoured bidder.

The financial bids for import of 400 million cubic feet per day (mmcfd) of LNG for a period of 15 years were quietly opened on Tuesday but immediately became controversial after the evaluators pointed out to two prices quoted by the lowest bidder, Elengy Terminal Pakistan Limited –a wholly-owned subsidiary of Engro.

The government is trying to award the contract before it completes its constitutional term in the next ten days despite the fact that the amount involved is roughly one-fifth of the total size of the national economy. Even the officials of the two bidding companies agreed that proprietary demands – the process of awarding the tender – should be delayed till such time that the next government is installed.

Elengy gave a Brent-based price, as required in the request for proposal (RFP), which turned out to be the lowest at $17.618 per million British thermal unit (mmbtu). It also quoted another price of roughly $16.56 per mmbtu, which was even lower than its bid. But this price was based on the Henry Hub formula, which was not considered by the evaluators. However it became the bone of contention.

The board of directors of the Sui Southern Gas Company considered the financial bids of the three bidders in its day-long meeting on Wednesday but no decision was taken, said managing director of the SSGC Zuhair Siddiqui while talking to The Express Tribune.

He said the board had raised certain queries which will be addressed by the bidders and after that another meeting will be held to determine the fate of the bids. On a question whether Elengy bid were the lowest and the compliant one, Siddiqui said, “We cannot say whether the bid was the lowest and compliant as it was under evaluation but it was not according to criteria set under the RFP.”

On the basis of the $17.618 Elengy bid, the annual value of gas comes to $3.086 billion and over the period of 15 year of contract the total price is $46.1 billion. The second lowest financial bid of $17.7074 per mmbtu was offered by the Pakistan Gas Port Limited, amounting to $3.102 billion annually or $46.53 billion over a period of 15 years. The highest bid was placed by a Turkish firm, Global Energy International, of $18.16 per mmbtu having a total value of $3.181 billion, valuing at $47.72 billion in 15 years. The lowest bid is considered economically viable by the procurement agency.

It is the third time that the project had become controversial. Earlier, the government scrapped the bidding process in January this year when two of three bids were in violation of the Public Procurement Regulatory Authority (PPRA) Rules of 2004.The first attempt was foiled in 2009 when the Mashal LNG import project had to be scrapped due to reports of losses. The project is aimed at overcoming energy crisis. It will take up to two years to bring the first flow of gas and by the time the gas shortage will increase to three billion cubic feet per day.

While talking to The Express Tribune, Imranul Haque, CEO of Elengy said, “His company’s bid is compliant and the lowest one too, thus, the government should immediately issue the letter of intent.”

The bids’ scrutiny process was already suspicious as the technical bids were opened in London instead of Pakistan. The consultant and SSGC officials stayed in Radisson Blu hotel for many days and technical bids were evaluated there, Haque confirmed.

Furthermore, two bidders claimed the consultant did not have expertise in LNG business and the consultancy fee was paid by the United States Agency for International Development.

Published in The Express Tribune, March 7th, 2013.

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