With competition nipped in the bud, the consumers shall pay the tab
ISLAMABAD: The lame duck PML-N government, whose tenure ended on May 31, 2018, under the stewardship of Shahid Khaqan Abbasi stopped the Port Qasim Authority (PQA) from going ahead with bidding for the allocation of a site for constructing third liquefied natural gas (LNG) terminal in Karachi, a step that would give monopoly to Engro Elengy Terminal Limited in the private sector.
According to documents, a week before bidding for the award of a site to private developers of LNG terminal, the bidding process was canceled. Final date for the submission of bid documents was March 19, but the process was canceled on March 14 by the PQA on the federal government’s directive.
Later, the Economic Coordination Committee (ECC) of the cabinet, chaired by then prime minister Shahid Khaqan Abbasi, considered the issue and decided that only those sites at Port Qasim would be allocated for setting up LNG floating terminals that had been declared safe after undertaking a quantitative risk assessment.
The cabinet, in its meeting held on last day of the PML-N government, also approved recommendations of a committee constituted by it earlier for constructing LNG terminals at Port Qasim and referred the matter to the PQA board of directors for further consideration and implementation.
Officials familiar with the development divulged to a national daily that the PQA had floated a tender for allocating site ‘B’ through competitive procedures, but the ECC declared the site unsafe for terminal building and halted the process. While taking the decision, the ECC bypassed the PQA board of directors.
Later, the cabinet on May 31 put the onus on the PQA board whether the project site should be shifted or the same site should be chosen for building the third LNG terminal. The cabinet also decided that a uniform tariff would be applied at all sites to be allocated for new LNG terminals.
Already, two LNG terminals are being run in the country – one by Engro Elengy and the other by Pakistan GasPort Limited. Engro has planned to expand the capacity of its existing terminal, but for that, it requires demand from the market.
It had also conducted a study on PQA’s A, B, C and D sites for constructing the LNG terminal, which declared all the sites safe. Later, the PQA floated a tender for site B based on the study. However, the outgoing government disrupted the process.
Engro has priced its tolling fee from the private industry for handling LNG imports at 50 to 80 US cents while Pakistan GasPort Limited has put it distinctly lower, at 41.77 cents. The differential is estimated to translate in an additional charge of around $1 million per cargo.
This was said to be the major reason why the PML-N government scrapped the bidding process, affording virtual monopoly to the existing player – ignoring the benefit that would have accrued to the consumers in a more competitive environment.
