An advertisement appeared in Wednesday's newspapers on LNG tolling service has raised several questions for the policymakers: (i) it was published in an inconspicuous manner so that it would be noticed by the least number of people to discourage competition;(ii) ISGSL has been designated in lieu of SSGC, as the commercial entity to handle/co-ordinate the Fast Track LNG project, whereas ISGSL does not have the technical staff, or capability to undertake such a complicated billion dollar services Agreement. (iii) while the advertisement states that Pakistan has a shortfall of gas of 2 BCF per day, it only targets a 200 mmcfd average intermittent supply of LNG as it reportedly suits a particular Company.
In the same time line if regular supplies, not intermittent supplies, are available - no option has been offered. Also the fact that gas processing through intermittent supply will increase the tolling tariff by almost 50%, has been ignored.;(iv) the LNG services are stated to include "transportation" of LNG, even though the project is based on a "Tolling" concept. Normally, LNG supply chain under the stated 10 year contract would be on Delivery ex Ship (DES) basis. Critical questions including why is "LNG Transportation" included in TS and how will transportation cost be bid if the upliftment point remain unanswered and ;( v) the timeline given is 335 days. In the same timeline a regular LNG tolling facility of upto 500 mmcfd can be created with a tolling rate of less than 50 percent of the Bids being invited on a limited volume basis.
The sources said since SSGC can handle 500 mmcfd of regular supply, it has reluctantly agreed that it will only handle 400 mmcfd of intermittent supply and many technical issues on intermittent supply have yet to be resolved. Also until a full computer simulation is carried out to determine the key parameters of gas flows, network balancing, line pack, Wobbe Index and swap arrangement with SNGPL, the project structure of intermittent supply cannot be considered to be technically viable.
According to sources, construction and operation of LNG terminal and transportation of Natural Gas through pipeline has been defined as Regulated Activity in the Law. Ogra has exclusive jurisdiction to grant licensees and determined tariff for Regulated activity. The provision of law cannot be over ruled by LNG policy. LNG policy 2011 states, all LNG terminals shall operate on a system of third part Regulated Access. (Section 6). According to section 6 (b) the tariff negotiated between public sector gas utility has to be approved by Ogra. The above issues should be examined and necessary corrections be made in the process and prospective bidders must be made aware of the Legal & Regulatory requirements. This provision of the regulatory law would not have been attracted if the GOP was to procure RLNG and not just tolling services.
Critics of this deal argue that the advert will not stand the test of transparency and is the most expensive solution for LNG supply. Over a 10 year Contract period it will add hundreds of millions of dollars in tolling charges which could easily be avoided.
"It is not understood why the Government cannot offer a transparent bidding process for LNG tolling and LNG supply Contracts or RLNG supply contracts and why is it in support of one party over others in a non-transparent manner," commented one of the critics.