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July 19, 2013

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Ministry seeks exemption from PPRA rules for LNG project

Ministry seeks exemption from PPRA rules for LNG project
ISLAMABAD: The Ministry of Petroleum and Natural Resources is not interested in transparency in the project to import LNG from Qatar as the ministry has sought exemptions from PPRA rules that will definitely breed controversy.
Additionally, the cost of the LNG has preliminarily been worked out at $19.49/MMBTU and the price differential will cost the country $326 million extra in the first year alone, The News has learnt.
The Economic Coordination Committee (ECC) that met with Finance Minister Ishaq Dar in the chair on Thursday has approved three different projects for the construction of terminals at Port Qasim for receiving, storage and re-gasification of LNG and constituted a two-member committee comprising secretary of finance and secretary petroleum and natural resources to look into the proposal seeking the exemption from the PPRA rules for materialising the project on the pretext of urgency keeping in view the ballooning energy crisis in the country. Secretary finance is also the chairman of the PPRA, a senior official told The News.
Secretary Petroleum and Natural Resources Abid Saeed confirmed that the ministry has sought exemptions from the PPRA rules on the LNG project as there is an emergency-like
situation in the country keeping in view the gas crisis, adding that the government needs to complete the project to import LNG as soon as possible.
However, according to the official who attended the ECC meeting, Dar has clearly asked the two member-committee constituted by him to find out any provision in the PPRA rules which allows the exemption and if there exists no provision, then the government is left with no option but to follow the “rule of law”.
The official said that the three different projects for construction of terminals at Port Qasim for receiving, storage and re-gasification of LNG were approved by ECC that include Fast Track Engro Terminal Project, which is likely to be completed between six to eight months at an estimated cost of $30-40 million and will have a capacity of 200 MMCFD modalities. It will be finalised between the secretary finance and secretary petroleum.
The ECC also decided to reaffirm its earlier approval for SSGC LPG Retrofit Project, estimated to cost $175-200 million having a capacity of 500 MMCFD. It also agreed to launching a new LNG Terminal Project estimated to cost $200-250 million having a capacity of 500 to 1000 MMCFD. The projects would be completed within 18 to 22 months and 26 to 30 months respectively. The ministry wants the LNG terminal contract be awarded to the parties of its own choice not through the bidding process, but on negotiated terms, which is to be the severe breach of the PPRA rules.
Likewise, the government’s claim that the LNG will be imported from Qatar on g-to-g basis is not correct as the private ConocoPhilphs company which enjoys the rights in Qatar to export the LNG will negotiate the term sheet with the government of Pakistan
According to the copy of the letter of ConcoPhillips, written to the ministry and available with The News, Qatar government has asked it to realise the export of LNG to Pakistan and to this effect its top officials are coming to Islamabad to negotiate the terms sheet on July 30-31 for LNG export.
When this scribe sent an SMS to Minister for Petroleum and Natural Resources Shahid Khakan Abbasi asking if the ministry wants to complete the project to import LNG by setting aside the PPRA rules and is the LNG deal with Qatar indeed under g-to g arrangement, he did not respond.
The inside sources told The News that both Engro+ProGas terminals are situated in the main Port Qasim (PQ) marine channel and it would be extremely unwise to carry out risky LNG operations in the vicinity of the main shipping channel. “God forbids if any accident happen then one of the main ports which is the lifeline of Pakistan could be shut down for an extended period with disastrous consequences.”
They said as consequence of the above the insurance cost for ships docking at port Qasim would increase significantly raising the cost of all imports. “LNG will be sourced from Qatar at a price equivalent to 14.9% of Brent, which will translate to a RLNG price of (110x14.9% [today’s Brent price] = 16.39+0.60[marine transport] +2.50[terminal tolling charge) = $19.49/MMBTU. This price is substantially higher than the price obtained in the recently cancelled tender which works out to $17.26/MMBTU. The price differential will cost the country $326 million extra in the first year alone,” said the sources.
The tolling charge for the makeshift terminal are estimated to be nearly double those of a normal Floating Storage Regasification Unit (FSRU) because of the concept of a mother LNG ship being moored off shore and feeding the terminal through a smaller FSRU ship.
The press release issued by the ministry added that the ECC has decided to constitute a committee under the chairmanship of Federal Minister for Science and Technology Zahid Hamid with Anusha Rehman, State Minister for Information and Technology, Chairman SECP, Deputy Governor State Bank, Secretary Economic Affairs Division to streamline registration and regulation of non-governmental organisations/international non-governmental organisations and put up a comprehensive report for the consideration of ECC within two months. The chairman of the committee has also been authorised to co-opt any person that he may deem necessary for the purpose.
While reviewing the report on implementation of the decisions taken by the ECC, a member of the ECC expressed satisfaction over the pace of implementation of its decisions.
The ECC was informed that the surge in the items included in the sensitive price index has been contained especially with respect to non-food items.
The meeting expressed satisfaction over the present stock of sugar and was told that 100,000 tons have been released to cater to the requirements of the month of July as well as Ramazan.
As for the fuel position, there is presently a stock for 21 days as compared to 12 days in the corresponding period last year (2011-12).
The meeting was informed that a healthy growth of 4.2% was recorded in large scale manufacturing sector as compared to 1.3% during the corresponding period last year (2011-12). The exports in 2012-13 total $24.52 billion showing an increase of 3.78% while the imports hovered around $44.95 billion. The remittances recorded a growth of 5.6% reaching a record $13.920 billion in 2012-13. However, the revenue collection was only Rs1882.7 billion showing a growth of only 3.1%.
The meeting was informed that the stock exchange index has reached a record 23160 points and market capitalisation has nearly doubled.
Anusha Rehman proposed that the charts reflecting the performance of economy should include another column showing targets so that there is a realistic analysis of the performance of the economy. The proposal was approved by the ECC. Chairman FBR Tariq Bajwa informed the meeting that SRO zero rating GST on dairy, bicycle and stationery has been issued.
The meeting noted that the Ministry of Industries has floated two international tenders of 50,000 tons each for import of urea on emergency basis of which one will be opened on Monday.
The ECC decided not to extend the expiry period for quotas of those parties who were unable to export sugar within the stipulated period. These quotas would now be awarded on first come first basis to applicants who would establish irrevocable letter of credit with a shipment date within 60 days.
The meeting was attended by Federal Minister for Science and Technology Zahid Hamid, Minister for National Food Security Sikandar Hayat Bosan, Federal Minister for Industries and Production Ghulam Murtaza Jatoi, Federal Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi, Minister for Railways Khawaja Saad Rafique, Minister for Planning and Development Ahsan Iqbal and Minister for Water and Power, Khawaja Mohammad Asif, Minister of State for Information Technology and Telecommunications Anusha Rehman, secretaries of various divisions and representatives of different departments.
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