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ISLAMABAD: The government has partially exempted 16 spot cargoes of Liquefied Natural Gas (LNG) from Public Procurement Rules 2004, procured or to be procured on spot price by PSO and Pakistan LNG Limited (PLL) till December 2021, fearing that NAB may initiate an inquiry in case of deficiency in procurement process, well informed sources in Petroleum Division told Business Recorder.

This decision was taken on August 12, 2021 by the Public Procurement Regulatory Authority (PPRA) presided over by Secretary Finance as Chairman of PPRA Board.

PSO has procured a spot shipment for September 26-27 delivery at the equivalent of $ 17.85/ MMBTU, one of the priciest LNG cargoes. M/s Vitol will supply the cargo.

According to sources, Managing Director (PPRA) apprised the Board that Ministry of Energy (Petroleum & Natural Resources Division) has requested to allow reduction in timelines required under Rules 13(1) & 35specific to the procurement of four spot cargoes of LNG to PSO and thirteen spot cargoes to PLL for the months of September, October & November 2021.

PSO, in its letter of August 06, 2021, stated that LNG procurement was made by invoking rule-42(d)(iii)through spot tendering that resulted in cost saving of Rs 2.1 billion on a single cargo.

PSO seeks five LNG cargoes for Oct-Nov delivery

Managing Director (PPRA) further noted that PPRA Board in its meeting held on February 12, 2008, decided not to grant blanket exemption, rather exemption should be object/procurement specific.

Secretary Power, Ali Raza Bhutta argued that exemption should be given for the specified time period only rather than restricting it with the number of cargoes to be procured.

DG (M&E) clarified that Attorney General in a past reference has invited attention on Section 21of the Ordinance where the word “procurement” has been qualified with the word “the” which means some specific procurement(s). He proposed that number of cargoes may be identified while recommending the exemption.

Managing Director PLL agreed that the PLL shall once again identify the requirements and send the exact number of cargoes to be procured till the end of December within one day. Secretary Power opined that partial exemption may be recommended specifying number of cargoes to be procured for a specific period.

Secretary Defence Production and Secretary Water Resources endorsed the opinion of Secretary Power for recommending the partial exemption in this case.

PPRA Management informed the Board that the Petroleum Division provided the details regarding spot cargoes required to be procured by PSO and PLL according to which spot cargoes required to be procured by PSO till December 2021 are as follows: (i) 29th - 30th August, 2021 (already procured); (ii) 16th-17th September, 2021; (iii) 26th-27th September, 2021 and; (iv) 22nd-23rd October, 2021.

PLL, in its letter of August 13, 2021 provided the tentative number of spot cargoes required to be procured till December 2021 as per following: (i) October 2021, four spot cargoes; (ii) November 2021, four sport cargoes and; (iii) December 2021, five spot cargoes.

After thorough deliberations the Board decided to grant PSO and Pakistan LNG Ltd. (PLI) partial exemption under section 21 of the PPRA Ordinance, 2002 from applicability of rule 13 and 35 of Public Procurement Rules, 2004 for the procurement of LNG through spot procurement of three cargoes for PSO and 13 cargoes for PLL till December 31, 2021 to the extent of relaxing the duration of response time to three days and reasonable period between the announcement of evaluation report and award of contract to the successful bidder, subject to the condition that fair opportunity shall be provided to potential bidders and to ensure the redressal of grievance, if any.

Sharing the details about amendment to Rule 13, 35 & 16(A) of the Public Procurement Rules, 2004, and the feedback of Power Division, the sources said, Managing Director PPRA revealed that Power Division through a letter of July 30, 2021 has urged the Petroleum Division and PPRA management to immediately bring a considered proposal to the PPRA Board in public interest along with necessary amendments to PPRA Rules on the “number of days” constraint imposed by PPRA rules including response time, bid validity, days after financial evaluation to bid award and grant of exemption to this sector from these constraints as events in the RLNG market over the last two months have further validated this requirement.

Managing Director PPRA further informed that amendments in rules have been brought in consultation with Petroleum Division which mainly focus on rule 13, ie, reducing the timeline from 15 days to three days and reducing the standstill period (required for addressing the grievance(s), if any and finalization of the terms and conditions of the contract under rule 35 from 10 days to one day.

Secretary Power Division maintained that we need to understand the logic of restricting the award period to one day in the proposed amendment as opposed to the proposal of Petroleum Division to award the contract on the same day.

DG (M&E) explained that there are two aspects in this regard. One is the standstill period and second is the grievance period before award of the contract. Although the Petroleum Division has not received any grievance in the instant case however they had disqualified a bidder in such type of procurement in the past who could have logged a complaint. Managing Director PPRA explained that disruption in demand and supply of oil and gas has emerged due to Covid situation and the PPRA is here to address the issue, adding that the Board is talking about amendment in rules to address the instant case whereas such rule will prevail to be complied by all the procuring agencies.

Secretary Petroleum (Special Invitee) briefed on the situation of RLNG market and the problem being faced by PLL and PSO regarding spot procurement of oil & gas for the economy. He noted that spot procurement has its own peculiarities especially in the oil and gas sector.

Moreover, the price has to be locked within hours or else the suppler shifts to other buyers immediately hence the price validity cannot be locked due to market volatility.

Pakistan seeks five LNG cargoes

Secretary Power opined that the issue at hand is not due to Covid rather it is because of the changing dynamics of the RLNG market. Secretary Defence Production proposed that rather than amendment in rules, PPRA Board should recommend exemption for a specific period to Petroleum Division to resolve the issue.

He apprehended that amendment, if approved, by the Board will encourage other producing agencies to seek exemptions for spot procurements which will defeat the spirit of these rules. Moreover, amendments, if, so required, may be approved provisionally by the Board to assess its impact.

Managing Director PPRA apprised that the proposed draft amendments also include amendment in rule 16(A) where maximum duration of both open and closed framework agreements for procurement of common use items, services and commodities shall be for a maximum period of three years.

He emphasized that the matter requires further deliberations by other Board Members as well and the same may not be approved in haste.

Secretary (Power Division) endorsed the proposal and recommended that Petroleum Division may bring relevant data with justification and analysis at least two months prior to expiry of exemption, ie, December 31, 2021 to review the proposed amendments of rule 13, 35, and 16(A) of the Public Procurement Rules, 2004.

After thorough deliberations, the Board decided that Petroleum Division shall provide relevant data analysis to PPRA at least two months prior to the expiry of exemption, ie, December 31, 2021 and PPRA Management may bring the case along with relevant data analysis to review the proposed amendments.

Copyright Business Recorder, 2021


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