LNG terminal contract: Prime minister refuses to give his seal of approval

The ECC on February 28 had approved, in principle, to award the contract to ETPL subject to getting the go-ahead from the prime minister. PHOTO:FILE

ISLAMABAD: The prime minister has refused to approve award of the multi-million-dollar liquefied natural gas (LNG) terminal contract to Elengy Terminal Pakistan Limited (ETPL) and has instead told the Ministry of Petroleum and Natural Resources to seek the nod of federal cabinet, sources say.

The directive came after the Ministry of Petroleum sent a summary to Prime Minister Nawaz Sharif for approval of the LNG terminal contract, which would lead to gas imports from November this year.

“However, the premier has sent back the summary to the ministry, directing that approval should be sought from the federal cabinet,” a source in the Prime Minister’s Office said.

The Economic Coordination Committee (ECC) of the cabinet, in a meeting held on February 28, had approved, in principle, award of the contract to ETPL subject to getting the go-ahead from the prime minister.

During the deliberations, the Law Division said Section 21 of the Ogra Ordinance 2002 empowered the federal government to issue policy guidelines to the Oil and Gas Regulatory Authority (Ogra). After the 18th Amendment to the Constitution, the definition of “federal government” had been changed and now the federal government or prime minister could give policy guidelines directly or through a federal minister, it said.

ETPL, a subsidiary of Engro Corporation, had been declared the successful bidder as it quoted a tolling fee of 60 cents per million British thermal units (mmbtu). In the first phase, the government plans to import 200 million cubic feet of LNG per day (mmcfd) from November this year and increase the quantity to 400 mmcfd in 2015.

According to officials, the price quoted by ETPL has been approved by the consultant. The price had been evaluated keeping in view the regional tolling rates for terminal handling and that’s why the federal cabinet was being asked to approve the contract.

However, the ECC was upset about payment of millions of dollars in capacity charges to ETPL on account of tolling fee by Pakistan State Oil (PSO) even if it was unable to import LNG. Economic managers suggested that PSO should carry out due diligence before issuing a letter of comfort to Sui Southern Gas Company for LNG import from Qatar.

“Since the federal government controls PSO, the letter of comfort would have a bearing on taxpayer money. Therefore, before issuing the letter, PSO should carry out due diligence,” the ECC said.

It also noted that the LNG services agreement was a commercial contract between two commercial entities including SSGC and ETPL and their boards of directors were competent enough to grant approval in respect of the agreement.