ECC likely to allow award of LNG contract today

SSGC recommends selection of lowest bidder for import of 400 mmcfd of gas.

ISLAMABAD:

The Economic Coordination Committee (ECC), which is meeting today (Friday), is expected to allow Sui Southern Gas Company (SSGC) to award 400 million cubic feet per day (mmcfd) liquefied natural gas import contract to the lowest bidder.

Financial bids, submitted by three bidders, were opened on March 5 at SSGC office in Islamabad and were evaluated by the company and its consultant. After finalisation of the process, the SSGC board of directors will recommend award of the contract to the lowest bidder.

Earlier, the consultant hired for bid evaluation had declared all the three bidders – Elengy Terminal Pakistan Limited (ETPL) along with ConocoPhillips, Pakistan GasPort Limited (PGPL) with Shell, ENI and China HarborExxon Mobil and Global Energy Infrastructure Pakistan (GEIP) – technically qualified whose financial bids could be opened.

In line with the decision of the ECC taken on October 10 last year, SSGC had sought proposals for supply of 400 mmcfd of LNG in the second phase. Technical bids were opened on February 12 and evaluated in London by a team of SSGC, international consultant QED and one of the members of an ECC sub-committee.



In the first phase, SSGC had invited open competitive bids for the import of 400 mmcfd of LNG. The bids were opened on January 9 this year, but since all of the offers failed to comply with the Request for Proposal (RFP), they were rejected under Public Procurement Regulatory Authority (PPRA) rules after the consent of ECC on January 29.



Recommendations of SSGC’s board of directors about award of contract to the lowest bidder, who will supply 400 mmcfd to SSGC, will be presented by a company team in the ECC meeting on Friday.

According to SSGC officials, two of the three consortia prequalified to bid for LNG import have asked SSGC to share price documents submitted by the third consortium led by ETPL, which claimed to have the lowest price.

In its letter to SSGC on March 6, GEIP sought complete price proposals of the other two bidders. PGPL also asked for the same, saying GEIP submitted a single-line price offer indexed to Brent prices in accordance with tender requirements, but ETPL gave a five-line offer indexed to “two non-standard/modified benchmarks of Brent and Henry Hub.”

“PGPL asked SSGC to share, as per PPRA rules, ETPL’s price document,” an SSGC official said.

According to SSGC officials, the Request for Proposal document, sent by the company to all bidders, had made it clear that there was no scope for adding elements to the formula set out in the draft (gas sales agreement). Despite the clear-cut instruction to offer a single-line price based on the scientific formula provided, ETPL submitted a five-line conditional offer, they said.

Furthermore, ETPL cited the Henry Hub index instead of benchmarking specifically to Brent, therefore disallowing comparison between the three price offers.

GEIP has offered the price of $18.16 per million British thermal units and PGPL has offered $17.7074 per mmbtu. ETPL quoted two prices. Brent-based price, as required in the Request for Proposal, turned out to be the lowest at $17.618 per mmbtu. It also quoted another price of roughly $16.56 per mmbtu, which is even lower. But this price was based on Henry Hub formula, which was not considered by the evaluators.

A 15-year gas sales agreement for LNG import has to be awarded to the lowest bidder.

Published in The Express Tribune, March 8^th, 2013.

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