$20b LNG project’s contract remains in limbo

Petroleum ministry insists that contract be given to same consortium.
ISLAMABAD: A deadlock persists as the Petroleum Ministry has still not started a fresh bidding process for the awarding of a $20 billion LNG contract, and remains adamant to give the project to a controversial global consortium.

The Petroleum Ministry and the Ministry of Law have been involved in a duel over the awarding of the LNG contract that was cancelled back in March by the Supreme Court due to the irregularities reported in the deal.

Minister Naveed Qamar wants to award the deal once again to GDF-Suez, which is against the orders of the Supreme Court but Law Minister Babar Awan is refusing to budge.

The multi-billion dollar LNG scam surfaced in March this year after it was found that a French party, GDF-Suez, a partner of 4Gas company/Carlyle, was given the $20billion deal despite the fact it had never participated in the bidding process. Chief Justice Iftikhar Mohammad Chaudhary had taken suo motu notice of this and after a month-long trial had ordered the Ministry of Petroleum to cancel the deal. The petroleum ministry then sent a summary to the Economic Coordination Council (ECC), once again selecting GDF-Suez for the contract. But Abdul Hafeez Shaikh who heads the ECC referred the matter to the law ministry which subsequently ordered that a fresh bidding process be initiated to ensure transparency.

In a bid to make Law minister Babar Awan fall in line to endorse the fresh deal, American and French diplomats had held meetings with him to clear the deal, sources said. But Awan refused. According to sources, petroleum minister Naveed Qamar approached Prime Minister Yousuf Raza Gilani and President Asif Zardari to put pressure on Babar Awan, but he again refused to give move from his stance.

An interesting bit of information shows that the Carlyle Group, a global partner of GDF-Suez was indicted in New York in 2009 for paying $13 million in bribes to political fixers to get large contracts.

According to information available to The Express Tribune, certain papers about to be tabled before the ECC, mostly comprising news cuttings of New York Times, Reuters, ABC channel and other international news sources, will give details of the bribes as well as the indictment.

No one was aware the Carlyle group, well known for its links with former US president George W Bush was behind this LNG deal till recently Naveed Qamar disclosed to the media that Carlyle Group had given a notice to the government of Pakistan that their interest in this project was only up till November 30, 2010. Naveed Qamar further said, “The deadline has already passed and before contacting Carlyle we intend to have a discussion in the ECC to decide one way or the other on how the project is to be dealt with. Based on what the ECC decides, we will move forward.”

Officials also told The Express Tribune the revelation that the Carlyle Group is backing GDF-Suez provides some answers as to why the petroleum ministry is so keen on awarding the contract on the original terms, and not follow the directives of the law ministry or the Supreme Court. Interestingly, Olivier Sarkozy, half-brother of President of France Nicolas Sarkozy is co-head and managing director of Carlyle Groups global financial services division, which has huge stakes in the $20billion LNG deal.
Published in The Express Tribune, December 24th, 2010.
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Foreign push for controversial LNG deal builds

Increased pressure to accept a ‘new’ summary that awards contract to the same firm.
ISLAMABAD: In a joint effort, the United States and France have begun piling pressure through official channels to push the top brass of the federal ministry of law to withdraw its legal opinion seeking the re-advertising of a controversial $20 billion LNG contract that was initially awarded to a French company.

The contract, awarded to GDF-Suez, was to be revised in line with instructions of the Supreme Court following its suo motu notice of a report regarding the irregularities in the contract awarding process.

After going through the official summary of the ‘new’ proposed deal, once again looking to award the multi-billion dollar contract to the same French company, the law ministry refused, point blank, to clear it – instead recommending the Economic Coordination Committee (ECC) to direct the petroleum ministry to re-advertise the whole contract. The summary had been sent to the law ministry by the petroleum ministry for comments.

However, despite the law ministry’s opposition, the ECC has been given till November 30 by the authorities of the ministry of petroleum to approve the deal.

Moreover, with the law ministry refusing to budge from its position of opposing the contract, the extraordinary pressure has begun from the outside. In unprecedented official communications, the government of Pakistan has been told in clear words through official channels that the US government is fully behind this project and the Pakistan government has to act and make sure that the project is put through.

The official documents, available with The Express Tribune, reveal that both the prime minister’s and president’s secretariats have jumped into the fray(A heated dispute or contest.
) to back desperate efforts of the French and US governments to make the law ministry fall in line and revise its legal opinion.

The rationale of re-advertisement was to ensure transparency in the light of the instructions of the Supreme Court’s three-member bench presided by Chief Justice Iftikhar Mohammad Chaudhry given on April 28 this year.

France is said to be so desperate to get the lucrative LNG deal that the French ambassador to Pakistan held a meeting with Law Minister Dr Babar Awan, and asked him not to put hurdles in the way of clearance of the multi-billion dollar LNG deal, which has been pending for the last six months.

Fresh pressure on the law ministry began after the chairman of the Board of Investment (BoI) decided to directly approach President Asif Ali Zardari and Prime Minister Yousaf Raza Gilani on the issue. Both the president and prime minister sent official letters to the law ministry for “appropriate action”. In his letter, the BoI chairman wrote that, “I have been receiving telephone calls/emails from Mr Robert B Drumheller, vice president Overseas Private Investment Corporation (OPIC), who has funded the project and advised me that they and the USA government are fully behind this project and the government of Pakistan, has to act and make sure that the project is put through”.

He further wrote that the, “project has come to ECC several times and has not been approved due to some reasons or the other. I feel the project of national importance needs your attention, which is the need of our government.”

The BoI chairman advised the president and prime minister to hold a meeting with both Petroleum Minister Naveed Qamar and Dr Babar Awan to resolve this issue at the earliest so as the project can be approved in the next meeting.

Earlier, the Supreme Court had taken suo motu of the awarding of a $20 billion LNG contract to GDF-Suez, which had not even participated in the bidding process. During the court proceedings, it was established that petroleum ministry bosses had seriously violated the rules and regulations governing such big deals.

Government officials, through their lawyers, confessed before the court and agreed to revise the deal. The SC, in its detailed judgment, also directed the prime minister to order an inquiry into the matter and punish the petroleum ministry officials involved.

However, petroleum ministry bosses surprisingly once again recommended the same firm, GDF-Suez, for the contract. Not a comma or full stop was changed from the previous summary. However, Chairman ECC Dr Hafeez Shaikh sought the comments of the law ministry before giving his approval. The law Ministry in its legal opinion said it would be against the rules to recommend GDF-Suez again.

Sources said that the petroleum ministry bosses continuously refused to heed to the opinion and took the matter to the ECC again and again. The petroleum minister first approached the prime minister to put pressure on the law minister so the project could be approved from the ECC.

The prime minister himself had told this correspondent recently that Naveed Qamar had repeatedly asked him to talk to Awan to revise his legal opinion, but added that he had not obliged him.

Subsequently, Qamar directly contacted the president, who agreed to speak to the law minister. Awan is said to have brought the whole situation into the notice of president, and said that they all would once again face legal trouble if SC took fresh notice of the deal, which was being inked without following the set criteria.

The latest twist in the saga is that foreign governments are now directly approaching the concerned quarters to make the law ministry fall in line.
Published in The Express Tribune, November 20th, 2010

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Govt may float fresh tender for LNG import
Petroleum ministry wants fresh tender; same company to get contract.
ISLAMABAD: Pakistan might float a fresh tender for a multi-billion-dollar Liquefied Natural Gas (LNG) import project as the petroleum ministry has tabled two proposals for the Economic Coordination Committee’s (ECC) consideration. In another proposal Ogra has indicated that prices of petroleum products may be increased from January 1.

“The petroleum and natural resources ministry has sent a new summary to the ECC, proposing that the tender should either be floated again or the contract awarded to [a company named] 4Gas,” the ministry’s federal secretary Imtiaz Kazi said on Thursday. Kazi said that the entire process of retendering and awarding the contract to a new party will take at most six months and could help save money, as new discoveries in the US have brought down LNG prices in the international market. However, he said, nothing could be said about this with surety just yet.

He said that should the ECC cancel the project, it will not have adverse consequences for Pakistan as the government had taken certain measures to avoid a legal battle.

Earlier this year, under the Mashal LNG import project, Pakistan awarded the contract to GDF-Suez for importing 3.5 million tons of LNG per annum (500 million cubic feet of gas per day) which could generate 2,500 megawatts of electricity per day. For setting up the terminal, the contract was awarded to 4Gas. However, following media reports that the government had lost $1 billion due to awarding the contract to GDF-Suez, the Supreme Court (SC) directed the government to revisit its decision and bundle together the two projects (supply and building the terminal).
The petroleum ministry has now sent a summary for awarding the contract to the same party as earlier, taking the plea that the SC did not ask for retendering. However, the law ministry opined that instead of awarding the contract to the same party, the petroleum ministry should retender it. This difference of opinion has led to a tug of war between the two ministries.

Kazi also indicated that prices of petroleum products may be increased from January 1, due to a hike in oil prices. This increase, he said, will have to be passed on to consumers as “one has to keep a realistic link with the international market”.

According to the Oil and Gas Regulatory Authority (Ogra), petroleum product prices have increased from three to nine per cent in the international market. Petrol prices have increased by 9.2 per cent, kerosene oil by 5.4, high-speed diesel by 5.8, furnace oil by 3.1 and Arab light crude oil by 6.6 per cent.

Ogra has proposed a minimum of six to eight per cent surge in the prices of petroleum products. The government, however, is in a fix whether or not to pass on the increase or absorb it – as it did last month by taking a hit of Rs1.5 billion.

“The government earns Rs250 billion in revenue from petroleum products. The decision of not passing on the increase will not only affect revenue but also result in additional burden on the budget in the form of subsidies,” Kazi said.

He said that to meet the soaring energy needs, the government was working on a four-tiered strategy. It was also working on exploiting domestic oil and gas reserves and the work on the 7.6-billion-dollar Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas import project was in full swing. He also said that India was still an active partner in the 1.2-billion-dollar Iran-Pakistan-India (IPI) gas pipeline project.
He also said that there was significant progress on import projects as the private sector had also come forward to import LNG. However, the import by private sector is subject to sovereign guarantees. He said that Independent Power Producers (IPPs) in Punjab have sought permission for LNG import and want to use the government’s gas supply system.

Published in The Express Tribune, December 31st, 2010.


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Karachi project: LNG terminal poses health hazard

Project may have consequences worse than the Bhopal tragedy.
ISLAMABAD: Alarm bells are ringing in Islamabad over a $160 million dollar project to develop a floating Liquefied Natural Gas (LNG) terminal adjacent to Karachi.

As the Oil and Gas Regulatory Authority (Ogra) starts public hearing on the project from Tuesday, certain officials feel that safety measures for such a project would need to be extra tight. The hearing seeks to give formal approval to Pakistan Gasport Limited (PGL) to set up the LNG terminal.

This multi-million-dollar deal was approved in 2007. Ogra granted a provisional licence to PGL on May 14, 2009, to complete the formalities for importing LNG. The Economic Coordination Committee (ECC) also immediately gave its ex-post facto approval to the implementation agreement.

After three years, the project is being launched and Ogra has announced that it will conduct a public hearing today. However, Ogra has advertised the announcement about the hearing in only one English newspaper. An official said that this could be an attempt to avoid public debate on this sensitive project as the paper in which the advertisement appeared was not widely read in Karachi. He said that many people in Karachi would be unaware that their fate was being decided in Islamabad at a public hearing.

Meanwhile, Shehri-CBE’s report on the project clearly warns that “potential hazards during the passage of LNG tankers along the Phitti Creek, degasification of LNG in the middle of the creek and storage of LPG on the public beach near Chashma, Khasheli, Haji Ayub and Ali Brohi goths have not been carefully investigated.

The proximity of residential, commercial and industrial facilities to the proposed location of the re-gasification plant and [the premises for] LPG storage has been deliberately downplayed in the Environmental Impact Assessment (EIA) report.

Only minor goths are stated as being within a 13-kilometre radius. However the map shows that the entire Korangi area, a large section of Malir, Jinnah International Airport, DHA Golf Club and a large number of people would fall within 12 kilometres of the proposed LNG terminal.

Experts said that the LNG terminal needs to be established many kilometres away from Karachi’s populated areas and that PGL needs to be obliged to take out comprehensive insurance to cover the extensive cost of any accident and be willing to pay the government for the cost of the added security and precautions that will need to be taken.

According to information available with The Express Tribune Ogra issued a notice to consider PGL’s application to undertake regulated activities related to LNG at Port Qasim, Karachi. This notice states that PGL (the applicant) filed a petition with Ogra on June 8, 2010, under Rule 4 of the Oil & Gas Regulatory Authority (LNG) Rules 2007. In the petition, they applied to undertake the following regulated activities at Port Qasim, Karachi: Construction of an LNG-receiving terminal, construction of an LNG-receiving and re-gasification facility including LNG unloading, marine facility, LNG storage facility, vapourisation and RLNG send-out facility.
Government sources say no discussion in Pakistan has so far taken place in civil society about the negative impact of having an LNG terminal located near Karachi. However, a report will be submitted during Ogra’s public hearing about how LNG plants have caused human fatalities.

A report by Tim Riley Law.com says that LNG is transported overseas to the location through LNG tankers. This is where the major danger lies, the report says. LNG tankers are quite large and a typical LNG tanker holds more than 33 million gallons of LNG, which equals 20 billion gallons of natural gas.
Karachi-based NGO Shehri-Citizens For a Better Environment (CBE), in its report carried by Alexander’s Gas and Oil Connections, has clearly warned that “if PGL’s LNG project is rammed through as per [the] existing arrangement, it has the potential to cause a debacle in Karachi, the size of which will make the Bhopal catastrophe in India or 9/11 tragedy in the US seem insignificant”.

Officials cite the catastrophic explosion at an LNG facility in Algeria in 2004. Initially, it was claimed that the Algerian plant was outdated but later, it was learnt that the plant had undergone modernisation just five years ago by former US vice-president Dick Cheney’s former company Halliburton.
In 2003, an explosion in south-west China was even more disastrous. Another LNG disaster took place long ago in 1944 in Cleveland, US.

But an official, speaking on condition of anonymity, said that larger disasters could take place as newer LNG tankers are built to contain 20 times more gas than the volume that burnt in the Cleveland disaster.

Published in The Express Tribune, January 4th, 2011.


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LNG project: Fresh tender despite pressureBy Rauf Klasra
Published: January 26, 2011
After the SC stopped the deal, the law and petroleum ministries had been at odds.
ISLAMABAD: The retendering of a $20 billion Liquefied Natural Gas deal comes despite extreme pressure, from within and outside Pakistan, to re-award the contract to the same firm that was involved in the initial controversial deal.
Key political authorities as well as foreign diplomats were actively lobbying for the deal to be given to the same French-American consortium without fresh bidding in the aftermath of the Supreme Court’s order to cancel the deal after it was found to be laced with incongruities.

As reported earlier, the law ministry had refused to sign off on advice that would see the re-awarding of the contract to GDF-Suez – a move that had the support of the ministry of petroleum.

The petroleum ministry’s position before the Economic Coordination Committee (ECC) was that the Supreme Court did not order fresh tendering in its detailed judgment, so there was no need for fresh tenders. But the law ministry did not agree with this interpretation.
An official confirmed to The Express Tribune that Federal Law Minister Babar Awan did not attend at least half a dozen meetings of the ECC in recent months after the issue became a bone of contention between law and petroleum ministries, as he did not want to deviate from his ministry’s written legal opinion.

Later French and American diplomats also met with Awan to convince him to support the move to give the contract to GDF-Suez again – a consortium that has links with former US president George Bush and half brother of French president Sarkozi.

The sources said that the fresh tender might save Pakistan a few billion dollars as the global prices of LNG have shown a considerable decline since the petroleum ministry had struck a deal with GDF-Suez.

The LNG deal had been stopped by the Supreme Court after top officials of the petroleum ministry, including its special secretary GA Sabari, confessed that GDF-Suez was given the $20 billion contract without having ever participated in the bidding. He had disclosed that the contract was awarded after negotiations, not through bidding as required under the procurement rules.

One insider said that a last-ditch warning by petroleum minister Naveed Qamar in Tuesday’s ECC – that retendering would significantly delay the project – fell on deaf ears. Finance Minister Dr Hafeez Sheikh refused to differ with the legal opinion to re-advertise the contract to ensure “transparency”.

Published in The Express Tribune, January 26th, 2011.
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