Open bid: Govt likely to invite fresh tenders for LNG supply

Ministry seeks ECC approval for award of terminal services contract to Engro.

ISLAMABAD:

Another tender for the supply of liquefied natural gas (LNG) is on the cards as the Ministry of Petroleum and Natural Resources is exploring the possibility of arranging gas supplies through international competitive bidding in addition to striking a deal with Qatari government. Talks with Doha are set to start today (Tuesday).

In a summary sent to the Economic Coordination Committee (ECC), the Ministry of Petroleum is seeking approval for the award of a terminal services contract to Engro Vopak Terminal Limited (EVTL) at the fee of $0.66 per million British thermal units (mmbtu) quoted by the selected bidder along with the conditions proposed by Sui Southern Gas Company’s (SSGC) board of directors.



EVTL made the offer following invitation of bids by Interstate Gas Systems (ISGS), a state-owned company dealing with gas import projects, for LNG handling, storage and re-gasification services at a terminal at the Port Qasim under a tolling agreement without involving any government guarantee. After selection of the bidder, the process was taken over by SSGC.

The project is aimed at handling a minimum of 200 million cubic feet per day (mmcfd) of LNG in the first year and 400 mmcfd in subsequent years. The contract, expected to start from November this year, will be for 15 years and the imported gas will be delivered to SSGC.

The bidder would meet all national and international LNG standards by obtaining a licence, permits, authorisation and approval for safe and secure handling.

The previous PPP-led government had also invited tenders for LNG supply but they were scrapped following a decision of the apex court. Separately, in a tender for LNG terminal services, only two local companies participated.

The petroleum ministry told the ECC that the SSGC board had considered the financial bid evaluation report of the consultant and approved it. This would depend on the government guarantee that LNG supplies would be arranged by the scheduled commercial date or 335 days from the effective date as SSGC was unable to make capacity payment to EVTL in the absence of LNG supply.

SSGC also negotiated the LNG services agreement with the selected bidder and its board approved the initial draft subject to the issuance of a comfort letter by Pakistan State Oil (PSO) or the government that in case of failure to import LNG, the company would be indemnified from the obligations to pay capacity charges.

It also sought the comfort letter from Sui Northern Gas Pipelines Limited (SNGPL) that would say that SNGPL would take its share of gas under the project and adjust its accounting procedures to ensure that the imported LNG was ring-fenced while calculating the Unaccounted for Gas (UFG) level.

For LNG import from Qatar, the ministry said it had nominated PSO for negotiating a sale and purchase agreement with Qatar’s designated company Qatargas.

Published in The Express Tribune, February 18^th, 2014.

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