ECC rejects multi-billion dollar LNG import deal

Committee directs petroleum ministry to get approval of lowest bid from SSGC.

ISLAMABAD:

The cabinet’s economic decision-making body has refused to give its stamp of approval to the controversial $46 billion Liquefied Natural Gas import transaction following the Sui Sothern Gas Company’s reluctance to sign off the deal it said quoted prices higher than the prevailing international market rates.

The standoff also saw SSGC’s Board of Directors Chairman Waqar A Malik tendering his resignation instead of accepting the bids for the LNG project.

Headed by Finance Minister Saleem Mandviwalla, the Economic Coordination Committee (ECC) on Friday termed the LNG summary, presented to it for approval, “half-baked” and prepared in haste. The ECC directed the petroleum ministry to first get the approval of the lowest bid from the SSGC Board before taking the matter to the cabinet for approval.

Secretary Economic Affairs Division along with some other members of the ECC also opposed the move.

Those seeking an early approval of the $46 billion deal have used a subcommittee of the ECC to reject the lowest bid of Elengy Terminal. The ECC had constituted the subcommittee to investigate wrongdoings in an earlier tender that it scrapped, after finding the bids to be in violation of the public procurement rules. Despite having no mandate, the subcommittee termed the lowest bid non-compliant and declared the second lowest bid as the lowest one.

The financial bids were opened earlier this week and Elengy Terminal Pakistan Limited –a wholly-owned subsidiary of Engro – bid $17.618 per million British thermal unit (mmbtu). Pakistan Gas Port bid $17.7074 per mmbtu, while a Turkish firm, Global Energy International, quoted $18.16 per mmbtu.

Meanwhile, the federal government forced the SSGC Board on Thursday night to approve the deal, which it refused to do so, and instead present 16 questions to be answered by the management. Sources added that Malik refused to cave in to the pressure and tendered his resignation.

The chairman expressed the opinion that even the lowest bid was higher than the prevailing LNG prices in the international market, sources said.

When contacted, SSGC spokesman Yousaf Jameel Ansari said he was not aware of the resignation but confirmed that the Board had not yet approved the bids and “these were still under consideration.”

“Placing of the LNG import deal summary in front of the ECC, having no stamp of the SSGC Board and even not [presenting] the names of the bidders makes the entire transaction suspicious and also raises questions of transparency,” said an ECC member on condition of anonymity.

The ECC also approved a provision of $700 million in sovereign guarantee for Sindh Engro Coal Mining Company (SECMC), a joint venture between the Sindh government and Engro Corporation. The approval comes with the condition that the government will be the majority shareholder. It will also be responsible for the primary obligations against the sovereign guarantee.

Besides, the committee relaxed the moratorium on new gas development schemes while asking the Oil and Gas Regulatory Authority to allow additional schemes of Rs5.6 billion during the current fiscal year.

Meanwhile, ECC also allowed the import of 130,000 tonnes of urea for Kharif Season 2013, a move that is not backed by any budgetary allocation and the government will have to provide a supplementary budget for lending subsidies on imported urea.

It also approved in principle, the initiation of the process of unbundling of gas utility companies. Consultants will be hired to undertake the assignment and a report will be submitted to the Council of Common Interests for approval.

Published in The Express Tribune, March 9^th, 2013.