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National

February 20, 2017

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China wants end to delay in LNG project

China wants end to delay in LNG project

Minister says laid-down procedure required to be completed

ISLAMABAD: In a new development, China has sought an end to delay in starting the implementation phase of $1.6 Gwadar-Nawabshah LNG terminal & Pipeline Project (GNGP) which will ensure the supply of 1.2 bcfd RLNG to the country.

The Executive Committee of National Economic Council (Ecnec) approved the project in September 2016 and the implementation phase should have been started the same month but it did not happen.

Gwadar-Nawabshah LNG terminal & Pipeline Project is one of the 51 projects promoted by President Xi Jinping during the state visit to Pakistan in April 2015.

In a letter to Federal Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi, a copy of which is exclusively available with The News, China Petroleum Pipeline Bureau has agitated the issue of delay saying the contract for the pipeline part has been ready for signing since the approval of Ecnec completed in 2016.

And in October 2016, the CPP accomplished commercial negotiations on LNG terminal portion of GNGP with Price Negotiation Committee and submitted to the Ecnec for approval.  The final contract of GNGP was originally planned to be signed at the end of November or early December 2016.

Now the third week of February 2017 is going to start, the project does not finalize the specific date of the contract signed, says the letter. The ministry, top sources in the ministry said, has been trying for the last five months to get the said two issues resolved as soon as possible, but the laid-down procedures and indecisiveness by the competent forum has delayed the project.

Once the sovereign guarantee by the ECC to ISGS is given, the ISGS will issue the sovereign guarantee to Chinese EXIM bank, then it will arrange the loans from Chinese EXIM bank and get the financial close. The financial closure will take 90 days and after that implementation phase will start. It means the project is further prone to delay.

China Petroleum Pipeline Bureau has opened its office in Islamabad for the almost one year with 30 to 35 officials and is quite perturbed over the delay in the project. Federal Minister Shahid Khaqan Abbasi confirmed that CPP had written a letter about delay but in the public sector there is a laid-down procedure which is required to get completed. 

He argued the Ecnec had approved the project in November and the minutes of the meeting the ministry were received after one and a half months and on the basis of the meeting the ministry submitted the summary to the ECC. 

However, in the ECC meeting the decisions are taken based on collective wisdom and the meeting sought the comments of Law Division on the issue of exemption from PPRA as per rule 5 and extending the sovereign guarantee to ISGS. 

The minister said there was no delay of five months, but admitted that approval of the said two issues had got delayed to some extent because of the laid-down procedure. For advancement, the summary pitched in the ECC on February 16, 2017 also available with the News, says the project requires from the ECC (Economic Coordination Committee) exemption from PPRA in accordance with the rule 5 as it has been finalized under government to government arrangement and no international competitive bid (ICB) was held.  And on top of that the issue of extending the sovereign guarantee to Inter State Gas System, which is designated company on behalf of Pakistan for entering into the contract with China Petroleum Pipeline Bureau, is being lingered for no reasons, which is why the implementation phase of project is getting delayed.

As per the ECC decision, a three-member meeting was held on January 2, 2017 with Minister for Planning, Development and Reforms Ahsan Iqbal in the chair comprising secretary finance and secretary petroleum to discuss the said two issues. 

In that meeting it was also decided that Ministry of Petroleum and Natural Resources will submit a summary for the ECC on: (i) exemption of the Project, being a Government-to-Government Project, from PPRA in accordance with Rule 5 of the PPRA rules read with the Public Procurement Regulations, 2011; and (ii) sovereign guarantee will be issued by Ministry of Finance.

But the ECC in its meeting held on February 16 again did not approve the summary meaning by that the final formal contract between CPP and ISGS will get delayed more.  The final formal contract signing is mandatory for advancement on the project.

However, ECC directed the Petroleum Ministry to examine all legal aspects of the proposal in consultation with Law Ministry and PPRA and then come to the forum again for approval. The chronology of documentation of the project unfolds that the governments of Pakistan and China entered into a Government-to-Government Framework Agreement on April 20, 2015 during the visit of the President of China to Pakistan. 

The G to G Framework Agreement was approved by the Prime Minister of Pakistan under rule 16(2) of the Rules of Business, 1973 and advised to place the agreement before the Cabinet for its formal approval. 

The Cabinet also approved the Framework Agreement on July 15, 2016. Subsequently, the Framework Agreement was extended for a period of one year with the mutual consent of the parties.

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