LNG tolling terminal: tender becomes subject of controversy

The latest tender for Pakistan's second LNG tolling terminal has become the subject of industry-wide controversy just days after it was advertised. The first LNG tolling terminal is already under investigation with the National Accountability Bureau (NAB) and several officials of Petroleum Ministry and Sui Southern Gas Pipeline Limited (SSGCL) have been quizzed over this project.
"The tender is a significant departure from both international and national practices because it allows technical and financial offers to be submitted without bidders having a firm site in place. The project's major capital expenditure on dredging, jetty and marine works, and subsea and onshore gas pipelines cannot be worked out without knowing the exact site on which the terminal will be located," said an insider in Petroleum Ministry. Well-informed sources told Business Recorder in all previous tenders at the very least a provisional No-Objection Certificate (NoC) for the site from the Port Qasim Authority was a prerequisite to qualify. In this case, the newly-formed Pakistan LNG Terminals Limited (PLTL) has done away with this critical requirement altogether.
The Economic Co-ordination Committee of the Cabinet headed by the Finance Minister, Senator Ishaq Dar approved the bifurcation of Government Holdings Private Limited (GHPL) aimed at establishing LNG Company in the public sector. PLTL, a subsidiary of Government Holdings Private Limited (GHPL), published the tender's notice on December 15 notifying the deadline for submission of bids as January 25 and stating that the Request for Proposals (RFP) document was available on the PLTL website. The RFP was uploaded five days later, a delay that insiders say was on account of last-minute changes made with a particular bidder in mind.
The bid document says: "The LNG services facility will be a new facility located in Port Qasim, Karachi. An increase in capacity of an existing LNG services facility will not be acceptable for the purposes of this Tender. The decision of PLTL will be final in assessing whether or not the proposal of a bidder constitutes an increase in capacity of an existing LNG services facility".
"This tender is a farce being perpetrated to benefit a predetermined winner," says an industry insider wishing not to be identified; "the predetermined winner is the same party that has been given a monopoly over LNG supplies to PSO," he claimed. According to sources, there are discrepancies between the tender notice published on December 15 and the tender documents. The notice requires an offshore solution for 400mmcfd while the tender document allows for an onshore solution for utilisation of 600mmcfd on a rental basis.
Bids are to be submitted on January 25 and the LNG Services Agreement is to be signed on February 29. The project has to be commissioned by March 1, 2017. "Onshore projects cannot be done in this timeline," says an official with Sui Southern Gas Company Limited (SSGC), which issued the previous tender that was cancelled last June. "The PLTL tender does not allow existing LNG terminal operators to expand their capacity. And while it has used the SSGC tender as the foundation, PLTL has changed the numbering criteria used by SSGC without explanation or logic," so stated the SSGC official, who asked not to be named, and added that the three parties that took part in the last SSGC tender appear to have been knocked out of contention as a result.
"These changes do not provide a level playing field and certainly not to these three parties," said an industry insider. He added that it was unusual that the site requirement had been waived. Insiders in the Petroleum Ministry also have doubts about the transparency of the process. "The tender document states that the successful bidder must provide a provisional NoC for the site when the LNG Services Agreement is signed with PLTL in February," says a Ministry source; "but the tariff that has to be submitted a month earlier, on the basis of which a winner will be decided, will be based on assumed costs related to an assumed site."
Industry sources are even more critical in their assessment. "The whole tender has been engineered to provide maximum advantage to one favoured party," says the industry insider. "The market assessment is that PLTL will only allow "blue-eyed party" to be qualified in the technical round so that the lucrative contract can swiftly be awarded without challenge or competition," the insider added.
The selected bidder shall furnish a performance bond to PLTL in the form of a bank guarantee issued by National Bank in Pakistan(NBP) in an amount equal to hundred and ten percent of the rupee equivalent to $10 million at the exchange rate quoted by NBP on the date of signing the LSA. The performance bond shall cover the discharge of all obligations and responsibilities specified in the LSA. Failure to furnish the performance bond within ten days of the signing of LSA will entitle PLTL to consider the bidder as having abandoned the LSA and to this effect forfeit the bid security. The performance bond shall remain valid for the remaining period of the LSA.