ISLAMABAD: The Sui Southern Gas Company has cancelled a tender for import of 500 million cubic feet of Liquefied Natural Gas through its LPG-LNG retrofit facility because of deficiencies in the bidding process.
A government official said on Wednesday the SSGC board of directors decided, with six of the 11 votes, to shelve the bidding process due to lack of a valid bid bond, non-completion of proper procedure and absence of bankable credentials of the lone bidder following detailed legal presentation by legal consultants.
Also, an independent consulting firm appointed by the USAID, the Quality Engineering Development Consulting Company of the UK, pointed out that prices and tariff offered by the line bidder appeared to be on the higher side. The rates should be negotiated after examining procurement rules.
The official conceded that repeated attempts to complete the LNG import process quickly in view of gas shortages in the country had resulted in wastage of almost six years and the only option now was to complete legal and procedural formalities in a proper way without acting in haste so that at least the facilities for LNG handling could be put in place.
The loser in the entire episode remains the consumer who continues to bear the burden of expensive and imported furnace oil. The economy is also suffering as the country is reported to be losing more than $1 billion per annum at current prices due to continued uncertainties about LNG imports.
He said a legal consultant — Mansoor Ahmad Khan & Co — had also pointed out some ‘slippages’ during the bidding process. The firm was of the view that any change in terms ought to have been advertised afresh to ensure transparency. Advertised or not, the changes should have been conveyed to the bidders participating in stage 1 of the process.
This was important given that requirement of LNG supply had been excluded from the scope of work while the requirement for a new terminal at an adjacent piece of land was also different.
The consultant said the bid of a competitor — Granada, which had not extended the validity of bid bond — should not have been evaluated by the bid committee. It also pointed out that change of procedure from two stages to one was not in line with rule 36b of the procurement rules.
It also said that while the bid committee had the power to waive a condition on the request of bidders to have valid bid security this could be challenged in court and was difficult to defend.
The 500MMCFD LNG retrofit was a turnkey storage and re-gasification unit located in the area and a floating project that required a few kilometres of pipeline for integrating with the SSGC’s transmission system. The entire funding was to be arranged by the bidders while the SSGC was to bear the cost of travelling, legal and technical fee of consultants, etc.
According to officials, it emerged before the SSGC board that the lone bidder — the 4Gas Asia — appeared to be a skeleton company with Martin White being the driving force behind it. Mr White had also handled the bid for Mashal LNG project.
The board was informed that the company had claimed it would have the support of equity partners like Riverstone and Atlas Invest of USA and technical support from BW.
Some directors were of the view that since the SSGC had no financial risk until the project implementation stage, the 4Gas Asia’s status was not a major concern at the moment as the bid security had been provided. However, strict timelines would need to be given for project implementation.
The SSGC directors also pointed out that the tolling charges seemed to be competitive and expected to provide savings to the company in the long run. However, in view of some grey areas on compliance matters, including bankability of the bidder and procedural changes, a majority of board members decided to scrap the project and report it to the Economic Coordination Committee (ECC) of the cabinet for a future line of action.
Last month the government had asked the SSGC board to examine the bidding results of the LNG retrofit project and if feasible go head with its implementation. The ECC said last month it approved three projects to import up to 1.7 billion cubic feet (BCF) of LNG, starting with 200MMCFD in six months and gradually going up in two and half years.
The second project allowed by the ECC for SSGC’s LPG retrofit project, estimated to cost $175-200m, having a capacity of 500MMCFD and expected to be completed in 22 months, has now been shelved.
The bidding for a new LNG terminal project, which was to be completed in 30 months at a cost of $200-250m with a capacity of 500 to 1,000MMCFD, is yet to take off.