TUESDAY APRIL 05: 'Mashal LNG' contract: SSGC to send legal notice to 4Gas group

ISLAMABAD: The Sui Southern Gas Company (SSGC) has decided to send a legal notice to the consortium of Dutch firm '4Gas' and French firm 'GDF-Suez to formally scrap the multibillion dollars 'Mashal LNG' import contract, Business Recorder has learnt.
"The Board of Directors (BoD) of SSGC scheduled to meet on April 18, 2011 will decide to send a legal notice to the consortium of '4Gas firm' in a bid to initiate process of re-tendering in line with the decision of Economic Co-ordination Committee of the Cabinet," sources said.
The ECC in the last week of January 2011 had decided to scrap the Mashal LNG contract in light of the opinion of Law Ministry, and directed for re-tendering the project. In February 2009, the ECC, headed by former finance minister Shaukat Tarin, had awarded the 3.5-million cubic feet per annum import of LNG contract to consortium of Dutch firm 4Gas and French company GDF-Suez. The total cost of the project was estimated at $25 billion. The controversy had erupted when Vitol/Fauji Foundation's joint proposal for short term LNG project was not tabled before ECC at the time the contract for '4Gas and GDF' was approved that led to the filing of the case in the Supreme Court. According to documents available with Business Recorder, 4Gas had expressed serious reservations over the proposed short term LNG project advertised by SSGC for which Vitol/Fauji Foundation had qualified.
"Given the experience in the LNG market, reliable world class suppliers are happy to work with 4Gas. However, we are constrained to point out that there is considerable confusion in the LNG supply market because of competing attempts from Pakistan to source LNG supply," 4Gas said in a letter, adding that the situation was further complicated by Sui Southern Gas Company's advertisement seeking expressions of interest for 'immediate' supply of LNG on short-term basis to the exclusion of Mashal Project.
4Gas had also said that the advertisement had created a substantial setback in discussions with suppliers. It is, however, fair to say that after this advertisement suppliers will only confirm irrevocable supply to the Mashal project after it has been awarded. Keeping in view the need for speedy gas supply to Pakistan, 4Gas had planned to implement Mashal LNG in two phases at a cost of US 600 million: (i) at PQA's Khiprianwala Island in the early stages via Floating Storage and Rages Unit (FSRU) (ii) followed at a later stage by a land-based regasification terminal.