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Bidders raise key questions at PSO's LNG moot

Pakistan State Oil (PSO) on Tuesday organized a bidders conference in Karachi for its tender to supply LNG, using the recently commissioned Engro terminal. Well-informed sources told Business Recorder the Babar Chaurdhry GM LNG Department and his team was there along with their US and local consultants, SSGC, Engro, FOTCO and USAid representatives. Babar said answers and clarifications would be uploaded on their website within 48 hours. However the current MSPA would not be amended. Representatives of interested bidders attended the meeting. These were BP, Shell, Gunvor, Excelerate, Vitol, Trafigura, Petrochina, Engro, AOT Trading and others.

Gunvor's queries: (i) Their representative raised most of the queries related to ship shore compatibility. PSO replied that a report with regard to these parameters will be uploaded on their website within 48 hours which will answer the queries related to ship shore compatibility. They asked if date of submission of performance bond can be changed cargo-wise, ie, 1st July for July cargo and then likewise for subsequent cargoes.

PSO said all successful bidders have to submit all Performance Bond on same date, ie, 1st July. Reference June 5, 2016 of LNG tender PSO should clarify the origin of the LNG, flag of the LNG carrier and any trade restrictions in the contract likewise petroleum tender. PSO said these are the regulations and policy of the GOP and bidder should know these. However they say they will try to clarify and confirm as per petroleum tender.

Shell: Will NDA apply to all state companies as well and if not to what extent? PSO replied it will share the necessary technical information and price with the gas utilities, who are the distributors of LNG. However, this will be according to PPRA rules.

2. Who will be the PSO's surveyor at discharge port? PSO said they themselves, SSGC and Engro have a common arrangement with SGS at discharge port. AOT Trading: What is the per day LNG handling capacity of the terminal? 300 mmcfd, PSO replied.

2.Who will do the shore ship compatibility? Excelerate will do so.

3.What is the criteria for the award of tender? The lowest bidder who accepts all terms and conditions of PSO will be awarded the supply contract.

4. What kind of security assurance has been undertaken? Representative of FOTCO terminal advised that security is under the Pakistan Navy which has taken the charge over two months ago. He further said that Qatar have approved the security arrangements.


1. Can Bidder issue Bid Bond and Performance Bond in local currency? No, PSO replied, saying that PSO will make payment in US dollars and both guarantees have to be in US dollars.

2. Has PSO secured separate credit lines for the LCs of LNG cargoes or is PSO relying on the same credit lines available for Fuel oil cargoes which can cause burden on existing LC lines and will result delays in LC opening? Zeeshan Haider, GM Treasury PSO, answered that PSO handles 8-10 cargoes per month of fuel oil and many more Mogas HSD, etc, so these four LNG cargoes will not cause any problems for them and that he does not envisage any delays in LC opening. LC lines are substantial since they arranged when crude was over $100 per bbl.

3. Is PSO going to have separate payment mechanism for LNG cargoes or this will be the same as of fuel oil? If so, circular debts issues are going to be worst ? PSO said they are talking to the Government / Ministry to evolve a payment mechanism separate from the fuel oil supplies to mitigate the risk of circular debt.

The government was insisting power plants arrange back to back LCs for purchase of LNG from PSO. The power plants are reluctant to accept.

BP: Is there any possibility of reducing amount of Bid Bond ($100,000) and Performance Bond since 10% PB is rather high. Can PSO make it in line with petroleum tender 3%? PSO refused to reduce the amount and said that this is to discourage non serious parties. If needed, bidders can add their financing costs onto the pricing.

In Technical Information Bidders are requested to provide BL or unloading documents as proof of supply of 8 cargoes in 24 months. May the Supplier make a summary of their LNG supplies and submit this as a proof that would be acceptable to PSO.

According to sources, PSO said though a summary will be useful and easy to understand but they need some documentary proof of minimum 8 cargoes in 24 months in the form of BL or other unloading documents.

Can a supplier who meets the minimum supply threshold mention in tender can back a third party into the tender which does not have the necessary experience? Would PSO accept the experience of the supplier in consideration of the third party submission? PSO said the bidder / supplier should meet all tender criteria and an un-pre-qualified third party not meeting tender criteria is not acceptable as the supplier. What are PSO's expectations in terms of changes to the MSA following the comments process?

Babar, GM LNG supply, said that MSPA is final for this tender. However, they can discuss any suggestions from bidders with their lawyers and see if these can be accommodated in future tenders. Minutes of the meeting will be uploaded on the PSO website within 48 hours. PSO said bidder can send further queries through email and they will reply to them.

Copyright Business Recorder, 2015