ISLAMABAD - The Economic Coordination Committee (ECC) scheduled to meet Friday (today) is expected to give go ahead to Sui Southern Gas Company (SSGC) to award 400 million cubic feet per day (mmcfd) Liquefied Natural Gas (LNG) import contract to the lowest bidder. Moreover, country’s apex economic decision-making body is also likely to take up summaries of petroleum ministry’s seeking approval to increase the deemed duty on the diesel (HSD) to 9 per cent from the current 7.5 per cent and to shut old CNG stations across the country.

Following its previous design to close down once robust CNG business in phase wise across the country, petroleum ministry in its dispatched summary to ECC has asked to close all those CNG stations, which completed 15 years operational time period and CNG stations should be allowed to start LPG business on their stations Though five years extension to the licence of CNG stations is permitted in Ogra as per CNG rule 7, yet to materialise its ‘foul design’ of closure of CNG business, the ministry has resolved that Ogra should not give five years extension to those CNG stations licences, which have completed 15 years time. And, the ECC should issue policy guidelines to Ogra advising the regulator to stop giving five years extensions to not only those CNG stations which have completed said 15 years duration but also to cancel their licences which have already gotten extensions. The ministry has also sought suspension of gas supply to such stations. However, future of CNG business is bright or not a decision to this effect is likely in today’s ECC meeting, as rightly appreciated by reliable sources at petroleum ministry.

The sources also said that the ECC has been approached for a raise in the deemed duty on HSD so that refineries can generate money from consumers in order to upgrade their plants to produce Euro-2 diesel. The ECC has been told that the cost of diesel will rise by Rs1.12 per litre if the deemed duty is raised from existing 7.5per cent to 9 per cent, in accordance with the demand put forth. “However, the price of diesel will actually go up by Rs2 per litre because the rise in deemed duty has been calculated at existing prices (which are subject to change),” sources added.

It is to be noted here that country’s refineries have received deemed duty for several years now, and have generated over Rs200 billion so far under the head. However, they have failed to upgrade their plants, for which the duty was intended. A judicial commission formed by the Supreme Court had earlier recommended abolishing the deemed duty being given to refineries that had failed to upgrade their production. These refineries were scheduled to set up plants in 2012, but received an extension from the ECC till July 1, 2014. Currently, the Pak Arab Refinery Company (Parco) is the country’s only refinery producing Euro-2 compliant diesel.

It is also learnt that economic body had been informed that pursuant to the decision of ECC taken on October 10, 2012, SSGC invited open competitive bids for first round of 400 LNG. The bids were opened on January 9, 2013. However, since all the bids were non-compliant to Request for Proposal (RFP), therefore the same were rejected by SSGCL under PPRA rules after getting approval of ECC on January 29, 2013.Meanwhile, SSGC sought proposals for supply of 400 mmcfd under second phase which is now considered to be first phase. The technical bids were opened on February 12 and were evaluated at London by a team of SSGCL, international consultant M/s QED and one of the members of the ECC sub-committee.

The consultant informed the ECC sub-committee that all three bidders including three consortiums submitted bids: ETPL with Conoco Phillips; PGPL with Shell, ENI and China HarborExxon Mobil were technically qualified and their financial bids may be opened. Economic body has been informed that the financial bids were opened on March 5, 2013 at SSGCL office Islamabad and were being evaluated by SSGC and their consultant. After finalisation of evaluation process, SSGC board of directors will recommend award of the contract to the lowest bidder.

ECC has been proposed to approve the recommendations of SSGCL’s board of directors to be presented by SSGCL team in ECC meeting with regard to award of contract to the lowest bidder for supply of 400 mmcfd LNG to SSGCL on integrated basis may be approved by ECC.

SSGC officials said that two of the three consortiums pre-qualified to bid for the first 400 mmcfd LNG import project had asked SSGCL to share the price documents submitted by the third consortium Elengy Pakistan, which is claiming to have offered the lowest price.

In its letter of March 6 to SSGC, Global Energy Infrastructure Pakistan (Private) Limited requested to provide the complete price proposals of the other two bidders. Pakistan GasPort Limited (PGPL) has also asked for the same and stated that GEIP submitted a single-line price offer indexed to Brent prices in accordance with the tender requirements, Elengy Terminal Pakistan Limited (ETPL) gave a five-line offer indexed to “two non-standard/modified benchmarks of Brent and Henry Hub.” PGPL has asked SSGC to share, as per Public Procurement Regulatory Authority (PPRA) rules, ETPL’s price document,” SSGC official said.

The three bids, comprising thousands of documents from each consortium, were vetted by QED Consulting, which is based in London and has 25 years experience in LNG sector. The consultant formally met with representatives from all three consortiums in London and pre-qualified all parties in its 60-page report as technically sound to proceed to the second round of the bidding process. The professional fees for QED consulting have reportedly been paid by USAID, which says it chooses its consultants carefully and after proper due diligence.

The Request for proposals document issued by SSGC to all bidders made clear that “There is no scope for adding elements to the formula set out in the draft (Gas Sales Agreement). Bidders must bid on the basis of the formula set out in the draft GSA” and that “Bidders are to bid a single price in US dollar per MMBTU for P (0).” Despite these clear-cut instructions to offer a single-line price offer based on the scientific formula provided, ETPL submitted a five-line conditional offer. Furthermore, ETPL cited the Henry Hub index instead of benchmarking specifically to Brent, therefore disallowing an apple-to-apple comparison between the three price offers.

GEIP has offered LNG at $18.16/MMBTU while PGPL has offered it at $17.70/MMBTU. ETPL’s price offer, while technically non-compliant because it does not conform to the tender requirements, if calculated according to the prescribed formula, comes out at $18.10/MMBTU. The 15-year Gas Sales Agreement for the first LNG import project has to be awarded to the lowest bidder.