Tackling a crisis: All fair in award of LNG terminal, says PQA chairman

ETPL has no advantage in terms of cost over other proposed terminals .


Saad Hasan November 18, 2014

KARACHI:


With a deepening energy crisis and the government struggling to find a quick fix, there is no shortage of those who say the opportunity is ripe for shrewd businessmen to make money. And much of their attention is on Liquefied Natural Gas (LNG).


Shortage of gas, its theft and wastage are reasons why Pakistan finds itself in such a precarious economic situation. But there is a near consensus that importing LNG is imperative if factories need to be run and homes to be heated in winters.

One of the largest Pakistani corporations, Engro, controlled by Hussain Dawood, is set to finish work on its terminal in two to three months to receive the first gas shipment.



A lot of questions about the deal are being asked and many are centred on Port Qasim Authority (PQA) where the LNG terminals will be located – one that is being built by Engro and another one to be put to bidding in late December.

On his part, the PQA Chairman Agha Jan Akhtar talks about the subject in clear terms. In an interview with The Express Tribune, he said that most of what is being said about LNG is hearsay and rumours.

“Engro Elengy Private Terminal Limited (EPTL) has no advantage in terms of cost over other proposed terminals,” he said, referring to reports that no other terminal operator could match Engro’s 66-cent tariff.

ETPL was awarded the terminal contract on the basis of its lowest bid. The only other short listed company was Fauji Foundation.

Industry people say that Engro already has a chemical-handling terminal at the site, helping it keep the cost low and drive out competition – something which appears fair but is akin to cornering the market.

“Engro Vopak (chemical) terminal has a completely different costing. They had to dredge, import new equipment and build a 42km long pipeline for LNG. They will only be sharing the trestle,” said Akhtar.

“In any case, how can you deny anyone the advantage of presence? We needed gas in the fastest possible time. Are you going to say no to Engro just because they have a lower tariff?”

Some people point out the changes PQA has made in its master plan to accommodate ETPL as an out-of-the-way favour.

“Our boards of directors have the authority to change our master plan,” the PQA Chairman said.

The second terminal, which has just recently been tendered by the Sui Southern Gas Company, will be located at Chhan Waddo, a creek located right across the channel from ETPL.

Some investors have pointed out that detail of agreements and contractual obligations of the terminal operator with government have been kept under tight wraps, leaving everyone to guess what they should offer in bid for the second terminal.

Ideally, the determination of terminal’s tariff should have gone through Oil and Gas Regulatory Authority (Ogra) that would have put everything on its website for public’s feedback. But that did not happen.

“There is a thing called a business secret. If ETPL can make profit at 66 cents then where is the problem? To indulge in how could they make money at 66 cents doesn’t make sense,” said Akhtar.

He also says that he has gone through the LNG Supply Agreement.

The PQA hopes to make around Rs1 billion a year in fee from the LNG import. “We are not expecting more than that in the first year because just 40 to 45 ships are expected. It might go up later.”

Published in The Express Tribune, November 19th, 2014.

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