Transparency International Pakistan has received a complaint against Sui Southern as Company (SSGC) for not abiding by Supreme Court's orders in Pakistan Mashal LNG Project (Mashal Project) and the Short Term LNG Supply Project, causing loss expected to Pakistan of $9 per mmbtu.
TI Pakistan Adviser Syed Adil Gilani in a letter sent to the Minister for Petroleum & Natural Resources, Dr Asim Hussain, on Feb 1, has quoted Supreme Court's judgement passed in suo motu case on April 28, 2010 as under: "In July, 2009 fresh Expression of Interest was invited for short-term supply of LNG on the direction of Minister for Petroleum. At that time Dr Aasim was In-charge of the Ministry."
The complainant has said that SSGC through Ministry of Petroleum has not followed the Supreme Court orders, and the commitment given by the Petroleum Secretary on July 28, 2010 for a fresh decision for awarding the contract for supply of LNG to '4-Gas', the developer declared qualified by the Consultant SSGC as well as simultaneously to put up a summary relating to the Fauji /Vitol proposal against the advertisement for Expression of Interest dated July 18, 2009 for consideration and decision independently and separately from the case of Mashal.
The complainant has stated that instead of implementing the Supreme Court orders, internationally tendered Mashal LNG Project which could have averted current gas crisis, GoP launched a private to private sector LNG project in May 2011.
This scheme was launched purely to grant pipeline capacity under Third-Party Access to private sector LNG developers. It now appears to be creeping towards incorporating key features of public sector Mashal LNG Project which are beyond the scope of the project as advertised.
This clearly is in breach of PPRA Rules and conditions stated in the EoI advertisement. In this regard attention has been invited to Secretary Ministry of Petroleum and Natural Resources letter dated December 7, 2011 addressed to Secretary Finance with copy endorsed to the Principal Secretary to the Prime Minister. This letter seeks provision for payment and securitization of instrument to the extent of $700 million for private to private payment obligations. That is payment obligations of IPPs and other private sector gas buyers towards private sector LNG/re-gases suppliers. That too at a time when LNG supply price being offered by the companies in question is as high as $20-22 per mmbtu.
It is really mystifying why decision makers want to set aside Mashal LNG Project under which LNG was offered at $11 per mmbtu as of May 17, 2010 (on the formulae today it is $13 per mmbtu) in favour of so called private to private sector scheme at nearly double the LNG supply price and GoP financial guarantees. It may be pointed out that a 50 cent increase in price on volume of 500 million cubic feet per day translates into staggering sum of $2.5 million per day! All at poor consumer's cost. Moreover, none of the three companies mentioned in the letter from Secretary MPNR to Secretary Finance which have been allocated pipeline capacity in the Sui Company's pipeline network have any LNG experience or standing in the LNG industry.
Mashal LNG Project needed only $200 million Guarantee, whereas Secretary Ministry of Petroleum and Natural Resources seeks provision for payment securitization instrument to the extent of $700 million. Transparency International Pakistan has also noted press report in Business Recorder dated February 1, 2012 which states that Mohammed Ijaz Chaudhry, Secretary Ministry of Petroleum, on Tuesday while briefing the National Assembly Standing Committee on Petroleum and Natural Resources, has informed that gas price under Iran-Pakistan gas IP project would be $11 per million British thermal unit (mmbtu) while for Turkmenistan-Afghanistan-Pakistan-India it would be $13 per mmbtu.
Adil has requested the Minister to examine the following allegations made by the complainant on SSGC and Ministry of Petroleum:
1. Why the Supreme Court orders dated April 28, 2010 were not acted upon in last 20 months, which has aggravated the shortage of gas in the country.
2. Why counter-proposals were invited on May 24, 2011, while the Supreme Court orders were not implemented?
3. Why three parties were pre-qualified for LNG supply in 2011, which are alleged to have no previous experience of LNG sector.
4. Why PPRA Ordinance and Public Procurement Rules 2004 have been violated in pre-qualifying the three parties which does not have any past experience.
5. Why cheaper LNG at $13 per mmbtu was not procured, and, instead, costlier LNG at $22 per mmbtu is being procured?
In that very Judgement, the Supreme Court had stated: "Here we may observe that it is the duty of the Court to ensure that the Public Procurement Regulatory Authority Ordinance, 2002 read with the Public Procurement Rules, 2004 are adhered to strictly to exhibit transparency. It is universally recognised principle that such type of transactions must be made in transparent manner for the satisfaction of the people, who are the virtual owners of the national exchequer, which is being invested in these projects.
Copies of TIP letter have been forwarded for information and urgent action under rules to observe Rule of law as MOP has been alleged to be violating Supreme Court of Pakistan orders in Suo Motu Case No 5 of 2010: Chairman, Public Accounts Committee, Islamabad, Chairman, NAB, Islamabad, Secretary Ministry of Petroleum, Islamabad, Registrar Supreme Court of Pakistan, Islamabad, Auditor General Pakistan, Islamabad, and MD, PPRA, Islamabad.