The Ministry of Law and Justice has reportedly refused to reconsider its earlier 'verdict' on the much controversial Mashal Pakistan and short-term Liquefied Natural Gas (LNG) project, saying that the projects should be re-awarded in a highly transparent manner.
These official documents, a copy of which is available with Business Recorder, are being placed before the Economic Co-ordination Committee (ECC) of the Cabinet, in its meeting on Tuesday (today).
The document said, pursuant to judgement of the Supreme Court of Pakistan in Suo Motu Case No. 5 of 2010, two summaries titled Pakistan Mashal LNG Project' and 'Pakistan LNG Import -Short Term LNG Project' both dated June 18, 2010, containing following proposals, were submitted to the ECC: (4Gas be approved as an Integrated Developer for Pakistan Mashal LNG Project who will be responsible for procurement arid transportation of LNG, setting up & operation of an FSRU based terminal, unloading, storage, re-gasification and supplying re-gasified LNG (RLNG) to SSGC/SNGPL as per the following main agreed terms & conditions: Terminal/supply-LNG Seller: GDF Suez (an affiliate or associate)- LNG Buyer & Integrated Developer: 4Gas B.V (an affiliate or associate)- RLNG Buyer: SSGC -
LNG Quantity for 6 years: 2.75 mtp priced at 3.95 percent brent + 0.75 (max of HH/NBP) + 1.58 and 0.75 mtpa @ 15 percent Brent +0.50. LNG quantity from 7th to 20th year: 1.0 to 1.5 mtpa priced at 15 percent Brent +0.5. Payment guarantees LNG- Letter of Credit on per cargo basis plus $300 mm bank guarantee- payment guarantees gas/terminal: GoP guarantee. Delivery: LNG-DES/RLNG-Outler flange of FSRU/terminal. Terminal tariff- maximum indicative US $0.50 per mmbtu, RLNG supply volume: equivalent to 500 mmcfd. Terminal type/location: FSRU or storage ship based located in Port Qasim (Khiprianwala) Karachi. First gas: Q4 of 2011/Q2 of 2012 (This is also the LNG Supply commencement window).
b) Award the Mashal LNG Project to 4Gas as an Integrated Developer and start negotiations to finalise Gas Sale Purchase Agreement (GSPA) and implementation agreement with '4Gas'.
c)- 4Gas to fulfil the requirements of Port Qasim Authority (PQA) and execute an implementation agreement with the Port Authority." Following options were proposed as regard the case of Short Term LNG Project: (a) Though not compliant to the Eo1. Vitol/Fauji's integrated offer submitted against the Short Term LNG Supply EoI advertisement may be considered for the second LNG project or in order to create competition and compliant to EO1, a new process for the selection of developer for the second LNG project may be initiated.
ECC vide case No. ECC-117/10/2010 and case No. ECC-116/10/2010. dated: 20/07/2010 directed as under:
Pakistan Mashal LNG Project (PMLP) (i) In order to ensure compliance of the orders of the Supreme Court of Pakistan, views of Ministry of Law. Justice & Parliamentary Affairs may first be obtained to ensure that the proposal submitted by Ministry of Petroleum & Natural Resources was in conformity with the directions of the court; (ii) the Ministry of Petroleum & Natural Resources will re-confirm that the price offered by 4Gas was the best price; (iii) Ministry of Petroleum will also satisfy itself about the financial health of 4Gas and (iv) the proposal will be resubmitted to the ECC after meeting the above observations.
Pakistan LNG imports - Short-term LNG Project. The ECC decided to take it up along with second summary relating to Pakistan Mashal LNG Project, when resubmitted along with views of Law Division,
To implement the ECC decisions regarding price offered by 4Gas and their financial health, M/s SSGC, who are the facilitator of Pakistan Mashal LNG Project and have hired the services of Consultants of international repute, were asked to take actions. Accordingly, SSGC took following actions: (i) M/s SSGC asked its Project Consultant (Poten & Partners) to ensure and re-confirm that the LNG price offered by 4Gas is still the best price. Consultants response confirms that the LNG Pricing offered by 4Gas/GDF Suez to Pakistan still remain attractive for medium as well as long term;(ii) to evaluate financial health of 4Gas. M/s SSGC asked M/s 4Gas for a Letter of Comfort from their major shareholders and a fresh funding plan for the Mashal LNG Project;(iii) in response. M/s 4Gas submitted following documents vide their letter dated 17/10/2010; (a) Carlyle/Riverstone's Letter of Comfort dated 13/10/2010, inter-alia, stating that although no specific level of financial commitment can be made at this stage, they will give full consideration to approving a final investment for the project upon notice of project award, assuming that such award is granted b 30th November 2010; (b) Atlas Invest. Letter of Comfort dated 14/10/2010, confirming their support for Mashal LNG Project;(c) International Finance Corporation (IFC) letter dated 18/10/2010, confirms 4Gas share holding (Carly/Riverstone & Atlaslnvest) and also their Joint Development Agreement (JDA) with 4Gas for implementation of Mashal LNG Project and (d) 4Gas Terminal project Funding Plan with 75:25 as Debt/Equity ratio. Debt funding by Overseas Private Investors Corporation, USA (OPIC).
According to the documents, SSGC forwarded the above documents to M/s Minto & Mirza (Advocates & Solicitors) for their legal opinion. Minto & Mirza's letter dated 20/10/2010 confirms that at this stage of the Project. 4Gas shareholder's confirmation, support and commitment showed for the Mashal LNG Project is sufficient and acceptable.
SSGC also forwarded the above submittals of 4Gas to SSGC's Project Consultant (Poten & Partners) for their opinion. They are of the opinion that there are still risks in proceeding with 4Gas, nevertheless, the documents presented by 4Gas provide a suitable level of comfort to proceed.
In pursuance of the ECC directives regarding views of Ministry of Law on the summaries, Ministry of Petroleum sent a reference to Law Ministry on July 26, 2010 for seeking their confirmation that the two summaries/ proposals for ECC dated 18/06/2010 are in conformity with the directions of the Supreme Court of Pakistan and comply with the said judgement.
In response, the law ministry on July 28, have supported re-advertisement the project whereas in respect of Pakistan Mashal LNG Project it was, viewed that "there is no document with (lie letter even if it is treated as a reference ) which could support the proposals put up by the sending Ministry hence, with respect, the proposals of MPNR are not confirmed and this Division is of the view that the proposal for the initiation of the new process qua the selection of developer and in all cases giving the treatment at par and observance of PPRA Rules in stricto senso is in the spirit of the judgement of the Supreme Court which implies transparency be the paramount consideration following the PPRA Rules and in one form or the other insistence upon the validity to previously exercise he avoided."
While concurring to Ministry of Law's opinion on Pakistan LNG import - Short Term LNG Project Petroleum Ministry was of the view that inadequate supporting/background documents might have led to Law Ministry said opinion on Mashal LNG Project. Therefore, a detailed revised reference along with relevant documents was sent to Law Ministry. The documents also included the opinion of S M Zafar. Sr. ASC, which confirms that the FCC Summaries dated 18/06/2010 were in accordance with the Supreme Court order.
The Law Ministry vide their O.M dated d 22/10/2010 received in this Ministry on 16/07/2010, reiterated its earlier views conveyed vide its D.O dated 28/07/2010, in response MPNR sent a reference dated 7/12/2010 to Law Ministry with the request to reconsider the matter in light of the judgement of the Supreme Court and in case they do not agree with the views of MPNR then the matter may be referred to the Attorney General of Pakistan for his opinion, MLJ&PA vide their U O dated 08/12/2010 inter-alia, have stated that "in view of observations of the Supreme Court contained in paragraph 13 & 14 of its judgement dated 28/04/2010, to the effect that the matter shall be considered in highly transparent manner both for Mashal Pakistan and Short Term LNG Supply Projects and after taking into account all the relevant documents/papers furnished by the referring Division, there is no scope for reviewing or dislodging of this Division s earlier opinion. Law Ministry have added that had the process proposed in portion 'b' of the Summary (reproduced at para-2-b above) initiated, the job could have been done much earlier. Moreover, there being nothing fresh available in the reference, the same is answered in negative while reiterating the view expressed already.
In this regard, Petroleum Ministry has submitted that ECC had asked for certain clarification mentioned in para-3 above before taking final decisions, therefore. Petroleum Ministry can not proceed on any one or all proposal(s) unless approved by the ECC.
Sources said the Ministry of Petroleum had approached the Ministry of Law almost three times to seek opinion on LNG Mashal Project in the light of decision of the Supreme Court.
"But the law ministry has shown no change in its stance and suggested to invite fresh bids to avoid any controversy on LNG Mashal Project deal in future," sources said adding that now Ministry of Petroleum will ask the ECC to invite fresh bids in light of the recommendations of Law Ministry.
The Petroleum Ministry officials are of the view that the Supreme Court had directed that a summary of Mashal Pakistan project be placed before the ECC for a fresh decision to award the contract to '4Gas', the developer declared qualified by Consultant SSGCL, along with the Vitol/Fauji Foundation proposal. Supreme Court did not place a bar on awarding the contract to '4Gas'.
After the decision of the Supreme Court, the Ministry of Petroleum placed a summary before the ECC to award a contract to '4Gas' and French firm 'GDF' along with proposal of Vitol/Fauji Foundation short-term LNG project. The ECC had directed that guidance be sought from the law ministry.
"It is a strong possibility that the ECC will decide to invite fresh bids for the project," sources maintained. 4Gas based in the Netherlands had submitted commitments of Carlyle/Riverstone and AtlasInvest which are 4Gas' main shareholders and US government agency Overseas Private Investment Corporation (OPIC) as credit provider, International Financial Corporation (IFC) a World Bank subsidiary as 12.5 percent equity partner and GDF Suez as LNG supplier. After receiving report from 4 Gas, the Ministry of Petroleum had issued a Letter of Comfort (LoC).
OPIC and IFC have committed to providing $370 million financing for setting up a terminal at Port Qasim for LNG import. 4Gas management has estimated an investment of over $600 million to complete the two phases of the terminal under PMLP.
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