LNG supply contract: Ministry puts Vitol/FF''s proposal on ice

The Ministry of Petroleum and Natural Resources has placed on ice the joint proposal of the Vitol/Fauji Foundation for annual LNG supply of 3.5 million tons contract under ''LNG Mashal Project'' despite an offer of the lowest price, saying that they had submitted the proposal quite late, Business Recorder has learnt.
According to sources, Petroleum Ministry clarified to the Economic Co-ordination Committee (ECC) of the Cabinet that complaint of Vitol/ Fauji Foundation was based on misconception. "In fact, they came very late," Petroleum Ministry said, adding that despite being late, a bid was floated for LNG supply only for five years. As a consequence, the joint proposal was presented neither to the ECC for decision nor to the evaluation committee.
"It is a strange excuse to kick Vitol/Fauji Foundation out of the race despite an offer of lowest price," sources said, adding that a conspiracy had been hatched to award the contract of LNG supply at higher rates. The Managing Director (MD) of Fauji Foundation approached the Finance Minister/Chairman of ECC and alleged that their proposal with Vitol was not entertained despite being the lowest offer.
According to a proposal, Fauji Foundation was to set up an LNG terminal at Port Qasim, whereas ''Vitol'' company was to supply LNG under LNG Mashal Project. The Petroleum Ministry also intimated to the ECC that a draft Letter of Award (LoA) and Term Sheets had been forwarded to both ''4Gas'' and ''GDF Suez''.
On receipt of their clearance, LoA would be issued to both companies. The ECC desired that in view of the demand-supply gap of natural gas procurement of additional LNG, possibly through Shell, should also be explored and proposal should be resubmitted to the ECC.
The Price Negotiation Committee (PNC) had submitted bids of only two companies, namely ''Shell and ''GDF Suez'', to the ECC in its meeting on February 9. The ECC had approved AoL to ''4Gas'' for 3.5 MTPA Floating Storage and Regasification Unit (FSRU) in phase-1 at a maximum indicative tariff of $0.50 per MMBTU. The ECC also accorded approval to award a contract to ''GDF Suez'' for supply of 2.75 MTPA for 6 years and up to 1.5 MTPA for 20 years. Under LNG Mashal Project, ''GDF Suez'' will be LNG supplier and ''4Gas'' will set up LNG terminal at Port Qasim.
The approval for award of contract to ''GDF Suez'' was given at the following price: (i) medium term supplies at 3.95 percent Brent + 75 percent Max (HH/NBP) + $1.58 per MMBTU and (ii) long term supplies at 15.2 percent Brent + 0.50 per MMBTU subject to further improvement in the light of the final round of negotiations to be undertaken with ''GDF Suez''.