AIRLINK 58.74 Increased By ▲ 0.75 (1.29%)
BOP 6.20 Decreased By ▼ -0.02 (-0.32%)
CNERGY 3.95 Decreased By ▼ -0.10 (-2.47%)
DFML 16.08 Increased By ▲ 0.38 (2.42%)
DGKC 67.48 Decreased By ▼ -1.07 (-1.56%)
FCCL 17.59 Decreased By ▼ -0.16 (-0.9%)
FFBL 25.91 Increased By ▲ 0.16 (0.62%)
FFL 9.17 Decreased By ▼ -0.14 (-1.5%)
GGL 9.82 Increased By ▲ 0.08 (0.82%)
HBL 112.95 Increased By ▲ 1.15 (1.03%)
HUBC 114.99 Increased By ▲ 0.19 (0.17%)
HUMNL 6.58 Increased By ▲ 0.14 (2.17%)
KEL 4.20 Decreased By ▼ -0.10 (-2.33%)
KOSM 3.59 Increased By ▲ 0.01 (0.28%)
MLCF 37.35 Decreased By ▼ -0.05 (-0.13%)
OGDC 116.69 Decreased By ▼ -0.51 (-0.44%)
PAEL 22.74 Decreased By ▼ -0.16 (-0.7%)
PIAA 10.76 Decreased By ▼ -0.59 (-5.2%)
PIBTL 6.22 Increased By ▲ 0.55 (9.7%)
PPL 104.26 Decreased By ▼ -0.99 (-0.94%)
PRL 26.47 Decreased By ▼ -0.08 (-0.3%)
PTC 9.55 Decreased By ▼ -0.05 (-0.52%)
SEARL 52.00 Decreased By ▼ -1.34 (-2.51%)
SNGP 65.15 Increased By ▲ 0.16 (0.25%)
SSGC 10.93 Decreased By ▼ -0.01 (-0.09%)
TELE 7.26 Increased By ▲ 0.10 (1.4%)
TPLP 11.97 Increased By ▲ 0.10 (0.84%)
TRG 77.22 Increased By ▲ 4.51 (6.2%)
UNITY 20.44 Decreased By ▼ -0.29 (-1.4%)
WTL 1.29 Decreased By ▼ -0.02 (-1.53%)
BR100 6,332 Increased By 45.7 (0.73%)
BR30 21,614 Increased By 27.8 (0.13%)
KSE100 61,914 Increased By 355.2 (0.58%)
KSE30 20,851 Increased By 132.3 (0.64%)

ISLAMABAD: The Auditor General of Pakistan has observed that Pakistan LNG Limited (PLL) committed Rs26.2 billion procurement-related irregularities in LNG business in the Audit Year 2021-22 laid before the parliament.

During the audit of PLL for the financial year 2020-21, it was observed that the entity faced Rs10.2 billion losses due to mismanagement in the import of LNG spot cargoes at higher rates for July, September, and October 2021.

The audit is of the view that mismanagement in procurement decisions resulted in the incurrence of extra cost of Rs10.2 billion on the purchase of LNG due to less lead time and LKM (Japan Korea Maker) forecast.

The Petroleum Division replied in accordance with PPRA’s guideline of accepting single bids while ensuring rate reasonability, bids received for initial tenders for July 2021 could not be awarded. However, PLL was constrained to purchase these cargoes later owing to directions from the ministry to procure LNG to avoid expected energy shortage.

For September and October 2021, the PLL’s Board of Directors (BOD) decided not to award any of the eight cargoes considering the downward trend of the prices in the market; however, the spot market rose, unexpectedly. The PLL immediately floated a PPRA compliant urgent tender for the procurement of four spot cargoes for September 2021 and seven spot cargoes in October and November 2021.

It was further observed that the federal government entered into inter-government agreements with seven LNG-producing countries. The suppliers submitted their revised price proposals on May 26, 2018, which were valid till June 15, 2018.

However, subsequent meeting of the Price Negotiation Committee (PNC) sub-committee of the federal government could not finalise the price offers till its expiry on June 15, 2018. The entire negotiation process with nominated suppliers was scrapped and PLL was compelled to procure LNG at a higher price.

The PLL made 30 spot cargoes from July 2018 to September 2021 at an average slope of 12.84 percent of Brent-higher than the offer of 11.82 percent made by G2G supplier. With this, excess cost of Rs9.7 million was passed onto the general public in the form of higher LNG prices.

In another audit observation, the PLL procured four LNG cargoes scheduled for December 2020 and January and February 2021 in December 2018, January 2019, November 2020 and October 2020. Since, the advance procurements were made from the long-term contract supplier, M/s Gunvor, thus, PLL made payments at 11.62 percent and 11.95 percent of slopes of Brent crude.

However, the PLL management failed to schedule alternative cargoes against the advance procurement and awarded four spot cargoes contracts to fill the demand supply gas for the period at slope of 12.85 percent to 23.44 percent of Brent crude which was higher than slope of tern cargoes. This resulted in an extra payment of Rs6.2 billion on procurement of LNG which was ultimately passed on to end consumers.

The audit further observed that the SNGPL submitted form demand for supply of LNG for the financial year 2020-21 but made payments against these cargoes after due date. SNGPL did not claim LPS which resulted in a loss of Rs4.4 billion up to June 30, 2021.

The audit report further says that the PLL’s BOD did not make procurement policy like delegation of powers of procurement of LNG, time framework of LNG tenders with reference to economic cost. In the absence of procurement policy, board awarded the spot cargos contract at high prices in contrast with its own earlier observation in 80th BoD meeting like an urgent tender would yield high prices due to less time between the award and delivery of cargo.

Copyright Business Recorder, 2022


Comments are closed.