The Economic Co-ordination Committee (ECC) of the Cabinet will consider a summary of Petroleum Ministry on second LNG terminal, tabled on Tuesday, within the next few days as the ECC did not have enough time to go through documents, well informed sources told Business Recorder. Petroleum Ministry, sources said, tabled the summary without getting comments from Ministry of Finance, Ministry of Planning, Development and Reforms, Cabinet Division, Ministry of Water and Power, Ministry of Law and Justice, Federal Board of Revenue (FBR), Board of Investment (BoI) and OGRA.
According to the rules and procedures, comments of all the stakeholders are mandatory prior to submission of any summary to the Cabinet or the ECC. However, the prevalent practice is entirely contrary to the rules and a summary's consideration depends entirely on the Prime Minister (as head of Cabinet) or the Finance Minister (as Chairman of ECC), sources told Business Recorder.
When contacted, Minister for Petroleum Minister said that the ECC members wanted a few days to read the LSA and the Petroleum Ministry agreed to this. According to the summary, a copy of which is available with Business Recorder, Pakistan is currently facing a severe shortage of natural gas, both for its electricity generating plants and for general use by all sectors. Domestic gas production of 4,000 MMCFD is unable to meet the country's demand. The supply-demand gap is approximately 2,000 MMCFD and keeps rising. The shortage of energy is not only causing hardships for the people but is also inhibiting the economic growth of the country. Therefore, the Government of Pakistan is pursuing import of LNG to minimise the gas shortfall.
Pursuant to the bidding process and ECC as well as the Cabinet's approvals of February 28, 2014, and April 18, 2014 respectively, Sui Southern Gas (SSGC) and Engro Elengy Terminal (PVt.) Limited (ETPL) executed an LNG Services Agreement (LSA) on April 3, 2014 for provision of LNG receiving, shortage and re-gasification services of 400 MMCFD under a levelised tolling fee of $0.66/ MMBTU. The terminal having an operational capacity of 600 MMCFD was commissioned on March 27, 2015 in a record time of 11 months and so far 34 LNG cargoes have arrived. On the supply side, as approved by the ECC in its meeting held on January 13, 2016 PSO has entered into an agreement with Qatar Gas for supply of 3.75 MPTA LNG over a period of 15 years. Besides this, PSO has also entered into an agreement with M/s Gunvor for a period of five years for supply of 0.75 MPTA LNG.
Since, the country is facing energy crises which requires immediate measures, the Ministry of Petroleum and Natural Resources submitted a summary to the ECC in October, 2015 with the proposal to mandate M/s Government Holding (Pvt) Limited (GHPL) to start the process for construction of second LNG terminal at Port Qasim under tolling arrangements through open competitive bidding process under applicable rules including PPRA rules.
The ECC approved the summary on November 25, 2015 which is as follows "ECC considered the summary of October 26, 2015 submitted by the Ministry of Petroleum and Natural Resources regarding import of LNG-2ndterminal and decided that GHPL may establish a subsidiary for setting up LNG terminal. GHPL may complete all the legal formalities for the purpose. The Memorandum of Article of Association of GHPL may be amended, if required. A committee consisting of Secretary Law, Secretary Petroleum and Chairman SECP shall ensure that all legal requirements are dully completed".
Accordingly, M/s Pakistan LNG Terminal Limited (PLTL) has been incorporated under the Companies Ordinance, 1984. The company has revealed that as per its mandate, it has floated a Request for Proposal (RFP) and advertisement " tender notice" in respect of TLTL LNG terminal project for procurement of services for LNG storage and re-gasification located at Port Qasim, Karachi. The following two bidders submitted their bids : (i) Pakistan Gas Port Limited (PGPL) ; and ( ii) Akbar Associates (Pvt) Limited (AAPL).
The technical bids of the both the bidders were evaluated by the PLTL's consultants M/s Galway Group and AAPL was technically disqualified whereas PGPL emerged as the successful bidder. Consequently, discussions on Operations and Services Agreement (O&SA) for LNG services were held by PLTL with PGPL and the O&SA was agreed which is in accordance with RFP and the PPRA rules.
Board of Directors of PLTL in its 12th meeting held on June 7, 2016 in principle approved the agreed O&SA relating to the operation of LNG services infrastructure and provision of LNG services for the PLTL projects. The summary further states that the financial bid evaluation report of PGPL results in a levelised charge of $0.4177/ MMBTU at 600 MMSCFD and 96 per cent availability. As per requirement of RFP, PGPL has incorporated a subsidiary namely PGP Consortium Limited (PGPCL) for execution of O&SA.
Accordingly, Petroleum Ministry submitted for consideration and approval of the ECC of the Cabinet: (i) O&SA as submitted by PLTL with PGPL/PGPCL at levelised service charge of $0.4177/ MMBTU for tolling services as quoted by the selected bidder (PGPL) ; and (ii) for conveying the decision to OGRA as policy guidelines in terms of section 21 of the OGRA Ordinance.