The government is likely to refer the award of contract for the retrofit liquefied natural gas (LNG) import facility at Progas Terminal to the Public Procurement Regulatory Authority for clearance, in an attempt to address concerns expressed by the board of Sui Southern Gas Company.
According to sources, the price offered by 4Gas Asia for the 500 million cubic feet per day (mmcfd) retrofit LNG import project looks competitive. However, the SSGC board of directors has raised objections and QED Gas Consulting is concerned about technical evaluation.
“Most of these issues have been sorted out, but some are yet to be addressed. The board’s observations including the voluntary extension in bid validity may be referred to the PPRA for a clean and clear opinion,” a source said.
Five out of six members of the SSGC board have voted in favour of getting all clearances before awarding letter of intent to the successful bidder.
Sources revealed that SSGC officials in a recent meeting with the petroleum minister in Karachi said the project would be completed in 22 months at an estimated cost of $163 million.
The qualified bidder quoted tolling tariff at 80 cents and sought payment guarantees with sovereign back-up. The maximum extension in bid validity ended on August 18, 2012 and 4Gas Asia voluntarily extended it by one month.
SSGC officials said technical proposals were received in the first stage on February 16, 2012 and out of five proposals, three were short-listed for the second stage including proposals from 4Gas Asia, Global Maritime USA and Granada Group of Companies USA.
SSGC provided the Request for Proposals (RFP) with revised conditions to the shortlisted bidders on October 31, 2012, inviting technical and financial proposals for the second stage. 4Gas Asia and Granada submitted the proposals on December 21, 2012, of which 4Gas Asia’s documents were found to be technically compliant.
However, the SSGC board raised several questions over the bid. It observed that the project in second stage was not retrofit and was also not in line with the ECC decision taken in October 2012. QED and its legal counsel expressed concern over the process.
The board pointed out that more than two extensions were not allowed in PPRA rules. A single bid could not be entertained to determine that it was competitive. Bid security condition was waived by SSGC at the request of the bidders.
SSGC officials replied to the board that it was a retrofit project because it would utilise existing facilities at the LPG terminal, except for the jetty, and was initiated much before the ECC decision, which would be approached for approval after the board gave its nod.
It also clarified that concerns of QED consultant and its legal counsel had been discussed and addressed.
The company management said PPRA Rule 24(3) allowed extension of bid validity for a period equal to the period of original validity and the single bid – tolling charge – would be compared with regional and international rates.
It stressed that bid security was never waived and only its submission time was changed, according to which it would be submitted after technical qualification. This was applicable to all the three short-listed bidders.
In India, LNG tolling price ranges from $0.605 for 1,400 throughput to $1.106 per mmbtu for land terminals. In Indonesia, tolling price is $1.8 per mmbtu for handling LNG at floating terminal and $1.2 per mmbtu for land terminal.
Average tolling price based on the year 2010 was $0.73 in the US and Canada, $0.87 in China, $0.81 in Europe, $0.89 in Korea and Japan, $0.72 in the Middle East and $0.71 per mmbtu in Southeast Asia.
Published in The Express Tribune, August 31st, 2013.
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