Official documents available with Business Recorder reveal that the project cost is estimated to be $30-40 million which will be provided by the EVTL. Citing an energy 'emergency', the ECC has also desired exemptions from mandatory Public Procurement Regulatory Authority rules to secure the lucrative project for its pre-selected party, Engro. This waiver has been sought despite the fact that the Supreme Court has twice initiated suo motu proceedings on LNG imports for perceived violations of PPRA rules.
The ECC may have misinterpreted the meanings of 'emergency'. "Emergency" means natural calamities, disasters, accidents, wars and operational emergency which may give rise to an abnormal situation requiring prompt and immediate action to limit or avoid damage to person, property or the environment. Analysts argue that PPRA exemptions can only be granted under an emergency (there is no scope for national interest in the Ordinance or Rules to allow exemptions under the use of National Emergency).
According to analysts, PPRA Board is not properly constituted as there are no private sector members at present and all the members are federal government employees or the MD of the procuring agency. The powers to exempt require a recommendation of the PPRA Board which should consist of the following members: (i) Secretary Finance; (ii) Secretary Industries and Production; (iii) Secretary Defence Production; (iv) Secretary Water and Power; (v) Secretary Housing Works, Secretary Communications; (vi) three members from private sector to be nominated by the federal government; and (vii) Managing Director.
Although, this is covered under section 23 of PPRA the entire exercise would appear to be 'rigged' in the absence of the private sector directors. Objects and class of objects are defined as item(s) which can be touched. Services do not fall in this category. This has been clarified by the PPRA in an earlier case.
The principles of procurement are being flouted as fresh procurement is being carried out at a much higher cost than the tenders recently cancelled. Informed sources told Business Recorder that the government-to-government exemption given in the Ordinance is being misused as the Qatari deal is going to be negotiated and signed with Conocco Phillips, which is a private company with no Government of Qatar ownership or shares. The funds for the transactions will also be paid to Conocco Phillips where the transparency ends and what actually gets passed on to the Qatar state is kept secret.
"Funds can be siphoned off to pay various interests in between. Furthermore the sovereign guarantee will be issued not in favour of the Qatar State but in favour of Conocco Phillips which further strengthens the argument that this is certainly not a government-to-government deal," the sources maintained.
Engro intends to convert its existing chemical import terminal at Port Qasim, Karachi, to receive LNG on a tolling basis. The terminal is situated in the main navigation channel of the port and is not suitable for the purpose, according to officials in Port Qasim Authority and the Oil and Gas Regulatory Authority citing international safety standards. The government is expected to seek special one-time waivers from PQA and OGRA to facilitate Engro. Official documents disclose that the EVTL will be the terminal operator under the tolling arrangements. A fixed per MMBTU tolling fee and annual throughput guarantee will be negotiated.
Petroleum Ministry's own documents point out the following constraints: (i) relaxation of PPRA rules may be required to award the contract without competitive bidding as the ministry claims that only EVTL can provide these facilities on a fast track basis; (ii) supply of LNG will be intermittent -500 MMCFD twice a month for 5-6 days each; (iii) licensing from Ogra; and (iv) ship movement and night navigation issues to be resolved with Port Qasim Authority.
The documents further reveal that during discussions between the Pakistan delegation and Qatar officials, it was envisaged that LNG will be delivered ex-ship (DES) to seller (to be nominated by Qatargas). The LNG will be stored and re-gasified at a receiving terminal in Pakistan. Depending on final conclusion of negotiations and consequent execution of LNG sale/ purchase agreement, it is expected that LNG supply can be made available by January1, 2014.
Normally the estimated construction time for receiving, storage and re-gasification terminal(s) is between 24 and 30 months from the date of award of contract to the prospective terminal developer. However, the Petroleum Ministry has also developed short term infrastructure proposals for the import of LNG. Accordingly, three different LNG infrastructure projects at Port Qasim, Karachi are being pursued by MNP: (i) fast track Engrop terminal project - up to 200 MMCFD (average); (ii) SSGC LPG Retrofit Project - 500 MMFCD; and (iii) new LNG terminal projects - 500 to 1,000 MMCFD.
Engro participated in the now-cancelled tender for LNG imports but its bid was declared "non-compliant" by the government's international advisor, London-based QED Consulting. Engro's bid contained at least 32 deviations from the Request for Proposals documents, and instead of offering a firm price in accordance with the prescribed formula, Engro submitted a conditional bid with its own pricing formula.
Engro's participation in the open tender process managed by Sui Southern Gas Company Limited also became controversial when it was revealed that the then chairman of SSGC was also simultaneously a board member on an Engro company. The former chairman, Waqar Malik, had publicly declared Engro the winner of the tender contrary to the opinion of the government's international advisor and SSGC's lawyers.
SSGC LPG retrofit project - 500 MMCFD According to the documents project developer will be selected by SSGC through competitive tendering process. The tender process was initiated in January 2012; one out of three bidders has been technically qualified and the financial bids will be opened on July 23, 2013.
Project activities include construction of LNG terminal adjacent to existing SSGC LPG terminal, provision of Floating Storage Unit (FSU), re-gasification at barrage, dredging and laying of 25 km pipeline from terminal to SSGC receiving point. The project cost is estimated at $175-200 million. All financing required for the project will be provided by the successful bidder. The successful bidder will be the terminal operator under a tolling arrangement. A fixed per MMBTU tolling fee and annual throughput guarantee will be as per the project developer's bid. The project will be completed after 18-22 months from the award of contract.
Only one bidder has been technically qualified. Single bid award is allowed under PPRA Rules; however, prior to award, SSGC will be asked to get clearance from PPRA. Licensing from OGRA will also be an issue. Ship movement and night navigation issues to be resolved with PQA. For new LNG terminal project of 500-1000 MMCFD, projected developer will be selected through a competitive bidding process. This project also faces the same issues like fast track Engro Terminal project of 200 MMCFD and SSGC retrofit project of 500 MMCFD.