Gas import: NAB starts probe into award of LNG contract

Inter State Gas Systems clears way for giving the contract to Engro subsidiary.

ISLAMABAD:

The National Accountability Bureau (NAB) has started probe into award of a liquefied natural gas (LNG) import contract and sought details pertaining to technical evaluation of bids.

According to a letter sent by NAB to the Ministry of Petroleum and Natural Resources, the investigators have sought different types of details about the LNG import project such as the consultant’s name, financial feasibility, technical viability and environmental assessment study.

They have asked for reports giving causes of the delay in processing the project, original and amended criteria for bidders and the final bid evaluation report.

NAB has also sought information about evaluation of bids and response to letters written by the Port Qasim Authority (PQA), warning that the use of its main channel in the sea for LNG handling could pose a threat to the industry and people living nearby.

Apart from these, NAB has also asked about compliance with Public Procurement Regulatory Authority (PPRA) rules in the bidding process.

Despite attempts, Petroleum Secretary Abid Saeed was not available to comment on the development.

According to sources, the government has decided to table two LNG retrofit projects before the Economic Coordination Committee (ECC) for approval of contracts after Inter State Gas Systems’ board of directors gave the go-ahead to the award of LNG services contract to an Engro subsidiary on Wednesday.

However, sources pointed out that the ISGS board cleared the project despite the fact that tender documents stated that the bidders or their affiliates should not be blacklisted by the World Bank or the European Union.

“ISGS ignored this clause and approved the award of contract to an Engro company, which is working in partnership with China Harbour Engineering Company, a subsidiary of China Communications Construction Company, which has been blacklisted by the World Bank until January 2017,” a source said.

The board argued that as the World Bank was not funding the project, the clause could not apply to LNG imports.

However, no one in the government was available to give a satisfactory reply why the clause was included in the tender documents when the project was not funded by the World Bank. This will lead to a complicated situation as it is against PPRA rules that tender documents are not followed.

Two companies – Pakistan Gas Port and Engro subsidiary Elengy Terminal Pakistan Limited – had submitted technical bids in response to a tender, but Gas Port was disqualified after technical evaluation. “Now, it is certain that the project will go to the Engro company, which is the only company left in the bidding process,” an official said.

Under the project, Elengy Terminal will provide services for the delivery of 200 to 400 million cubic feet of imported LNG per day (mmcfd).

Another LNG retrofit project is pending with the petroleum ministry, which also needs to be put before the ECC for approval of the award of contract to 4Gas Asia, which will provide terminal services for supply of 200 to 500 mmcfd of LNG per day.

This project has already been cleared by the board of directors of Sui Southern Gas Company (SSGC). “Now both projects will be tabled before the ECC for the award of contracts,” the official said.

This is a unique project in which SSGC will not have to make any investment. According to a senior government official, the present government had approached Qatar to strike an LNG import deal on a government-to-government basis. In response, Qatar asked Pakistan to commit to setting up an LNG terminal before signing the deal.

The SSGC board considers the price offered for the project to be competitive. The terminal will be completed in 22 months at an estimated cost of $163 million. The qualified bidder has quoted 80 cents as the tolling tariff.

In India, LNG tolling price ranges from $0.605 for 1,400 throughput to $1.106 per mmbtu for land terminals. In Indonesia, the tolling price is $1.8 per mmbtu for handling LNG at a floating terminal and $1.2 per mmbtu for a land terminal.

Average tolling price based on 2010 prices was $0.73 per mmbtu in the US and Canada, $0.87 in China, $0.81 in Europe, $0.89 in South Korea and Japan, $0.72 in the Middle East and $0.71 in Southeast Asia.

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

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