ISLAMABAD: Controversies over the import of liquefied natural gas (LNG) seem to be a never-ending game even after the passage of five years and an expenditure of $5 billion in additional oil imports.
A fresh tender for the import of 500 million cubic feet of LNG has been questioned at the very outset by former and prospective bidders. They see the request for proposals (RFP) sought by Inter State Gas Systems (ISGS) in conflict with the country’s procurement rules and apparently favouring a single party.
Simultaneously, a controversy is still brewing among the board of directors of Sui Southern Gas Company over the reported cancellation on Aug 17 of another tender for 500mmcfd of LNG in which a single bid was evaluated.
Informed sources said an influential group within the SSGC board was now questioning the majority decision of cancellation of bidding results of LNG Retrofit project and trying to call a fresh board meeting to undo an earlier decision taken by it with a vote of 6 to 5. The other group is reported to have decided to provide recording of the proceedings to courts of law.
Documents available with Dawn suggest that a major contender to most of the previous LNG biddings has openly questioned the tender issued by ISGC that seemed to be on behalf of SSGCL.
“The RFP lacks clarity on the procuring agency for the LNG services and the roles of SSGC and ISGS”, said Global Energy International in a letter to ISGS — a public sector company set up for natural gas import projects.
It said the ISGS was defined in the RFP as guiding the procurement services and SSGC as company providing letter of credit for LNG services even though PPRA (Public Procurement Regulatory Authority) rules distinctively put forth the rights and obligations of procuring agency but in this case the procuring agency (SSGC) was not the advertising agency and hence “may constitute a violation of PPRA rules”.
DEVIATION FROM POLICY: The Global Energy of Turkey said the requirement in the RFP to transport LNG by terminal operator or owner was in conflict with LNG Policy 2011. It said shipping/transportation was a distinct separate activity from
re-gasification services (which include berthing and unloading of LNG carrier to terminal vessel, conversion from liquid to gas and delivery of LNG to designated point).
“Bundling re-gasification and shipping may constitute a violation of PPRA rule 10 & 32 which call for widest possible specification.” This bundling is also not in accordance with LNG Policy 2011 which specifies storage, re-gasification and transportation of LNG as the only responsibilities of the terminal operator. “It seems that the tender has been designed with a pre-determined proposal/project design in mind” and hence a violation of PPRA Rule 4.
Moreover, the Global Energy pointed out that LPG Company was a wholly owned subsidiary of SSGC specified in the current tender for retrofitting of LNG terminal for supply of 500mmcfd and, hence, responsible for all terminal and post costs, pilot fees, tug fees and marine costs.
While the contract for terminal services is for 20 years, the ISGS tender for supply of LNG was for 10 years, which seemed to be in breach of rule 32 of the PPRA rules 2004.
It said the requirement to put the responsibility on the LNG operator to transport LNG was discriminatory because the Economic Coordination Committee had directed all the public sector entities to use PNSC vessels, but instead of following the directive, it was trying to put the transportation responsibility on others.
Also, the SSGC and ISGC are committing on behalf of the government to make capacity payments (throughput guarantees) without any LNG supply contract which is likely to be uneconomical, become a very sensitive issue and invite judicial intervention. It said the tender was also not clear about LNG supply — whether it was 400mmcfd initially or 500mmcfd and then 625 MMCFD.
While the company had also raised questions about price evaluation criteria that was in conflict with LNG Policy, it said a high variation in Wobbe Index (low local BTU/higher for LNG imports) from spiked supply “will most likely blow turbines and other industrial equipment in Pakistan”.
Building quality adjustment facilities for interruptible supply was twice expensive as for baseload as the facility would be used at 50 per cent capacity and it was unclear how SSGC would hold terminal operator responsible for quality of gas when SSGC itself would be responsible for LNG procurement.
Moreover, only 400mmcfd swap capacity exist between North and South gas transmission system while interruptible supply will block whole capacity but deliver only half the gas — bad value for money. All these issues,
“prima facie lead to the conclusion that RFP is restrictive, narrowly-focused and may contain multiple violations of PPRA rules”, the Global Energy said
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