Issuing guarantees for LNG deal: MoP asked to get prior clearance from Finance, PC

Prime Minister Yousuf Raza Gilani has directed the Ministry of Petroleum to seek clearance of billion-dollar LNG deal from Finance Ministry and Planning Commission before issuing guarantees, as the top guns of Petroleum Ministry were alleged to have ignored the lowest bidder, Business Recorder has learnt.
Its has been alleged that the Ministry of Petroleum and National Resources put the joint proposal of the Vitol/Fauji Foundation under the carpet for the annual LNG supply of 3.5 million tons contract under 'LNG Mashal Project' despite offering lowest price just on the pretext that they had submitted the proposal very late. The Managing Director of Fauji Foundation had alleged that their joint proposal with Vitol was not entertained despite being the lowest.
According to sources, the Prime Minister, who chaired the meeting of Economic Co-ordination Committee (ECC) of the Cabinet on March 30, considered the summary on 'Letters of Award for LNG project' under 'LNG Mashal Project', moved by the Petroleum Ministry.
Sources said that the ECC approved, in principle, the issuance of bank guarantee worth $300 million, subject to review and concurrence of the advisor to the Prime Minister on Finance, Revenue, Economic Affairs Division and Planning and Development.
The ECC was informed that it had decided that instead of Stand By Letter of Credit (SBLC), Sovereign Guarantee for $500 million be issued by Ministry of Finance to cover the LNG supplies. GDF Suez was approached to accept the Sovereign Guarantee, as decided by the ECC.
Their delegation visited Pakistan on March 24-25, 2010 and discussed the issue in detail with the authorities concerned. In view of their previous two defaults of Sovereign Guarantees, the GDF Suez was not in agreement to the preposition of Sovereign Guarantee. However, GDF Suez had agreed to reduce the amount of Bank Guarantee from $500 million to $300 million. They also agreed to accept a guarantee through a bank of international repute or even by any international institution or multinational lending agency, as proposed by the Ministry of Finance.
To minimise the cost, GDF Suez was also made to agree that instead of at least two years revolving guarantee, earlier required by them, the period be reduced to one year, with a six months review prior to the expiry of the one year term. The Ministry of Petroleum and Natural Resources proposed that inter-ministerial recommendations for issuance of a bank guarantee of $300 million, instead of $500 million Sovereign Guarantee earlier approved by the ECC on February 09, 2010 may be reconsidered and approved.