There were huge problems with the $20 billion tender bid for LNG project which would import containerized Liquefied Natural Gas (LNG) from Qatar. The gas would assist Pakistan is meeting its energy needs. The project has been encouraged by the US which has been putting pressure on Islamabad not to build the pipeline with Iran. Iranian gas is about 80% of the market value of petroleum.
The Qatari gas will be higher, perhaps as expensive as oil itself or slightly lower. Rupee News has covered the story of “Pipelineistan” on many occasions and follows the developments with an eagle eye.
The scandal for the LNG involved the Finance Minister who had to resign. This is the second time the judiciary has intervened in canceling major corrupt business deals. The Chief Justice had questioned the sale of one of the biggest assets owned by the government of Pakistan–the Steel Mills. That cancellation led to the gargantuan power struggle between the presidency and the judiciary, culminating in the departure of President Musharraf and the restoration of the Chief Justice.
Pakistan is in the vortex of the energy battles which are waged between the US, Russia and China. Many say that the Afghan invasion was to force the Taliban to allow the TAP line to cross Pakistan to the sea.
It is more than obvious that the US is now once again interfering in the energy supply lines of Pakistan and pressuring it to purchase gas from Qatar.
Pakistanis see this as a stop gap measure while it develops its Thar coal reserves which can be used produce electricity, gas and other products. Tom Wright describes it well in the Wall Street Journal.
There were rumors that Pakistan did not want to give the LNG gas project to a French company–especially after it had suspended the JF-17 Thunder parts contract with Pakistan. Many Pakistanis believe that the loss of $20 billion for France will show them that Pakistanis cannot be taken for granted. France has liberal laws which allow for kickbacks to local government officials. Fingers have been pointed at Mr. Tarin the former finance minster.
The government could have pleaded with the Supreme Court that this was an issue of national security, but it did not
Pakistan’s Supreme Court on Wednesday canceled a contract for 3.5 million tons of liquefied natural gas per year awarded in February to French oil and gas company GDF Suez SA, citing irregularities in the tendering process.
The Supreme Court, in a ruling published on its website, said the Ministry of Petroleum and Natural Resources had not followed standard procedures in awarding the six-year contract. The court found that the ministry had accepted bids from Suez and Royal Dutch Shell PLC but had ignored a lower-priced offer by a consortium of Europe-based oil company Vitol SA and a business foundation controlled by Pakistan’s armed forces.
The value of the bids, including Suez’s offer, wasn’t disclosed. The court ordered the government to cancel the award and reopen the tender.
A spokesman for Suez said the company was “confident in the quality of its offer” but gave no further details. The Paris-based firm plans to take part in the new round of bidding, he said.
The cancellation comes as Pakistan is looking to avert a major energy crisis by importing millions of tons of LNG in coming years to generate power. Once a major gas producer, Pakistan has underinvested in exploration for natural resources and now has been forced to look overseas for supplies.
Failure to act quickly to secure gas supplies and build new power stations could crimp economic growth. Power cuts of up to 16 hours per day are already hurting Pakistan’s businesses.
Shaukat Tarin, who was finance minister at the time of the deal with Suez but has since resigned, said the Supreme Court decision was trying to show that Pakistan was committed to a level playing field for foreign investors. Mr. Tarin said the Vitol consortium had complained to him after its offer wasn’t considered. The ruling “should be a lesson to all departments in the government” to act more professionally, he added.
A spokesman for the petroleum ministry declined to comment and referred to the court’s ruling.
The U.S. has been keen for Pakistan to import LNG from Qatar, a major producer located in the nearby Persian Gulf, to stop the country looking to its western neighbor, Iran, for gas supplies. Last month, Pakistan signed an agreement with Iran to begin the construction of a pipeline to link the two countries—a pact that caused public statements of concern from the White House, which has imposed economic sanctions on Tehran because of its nuclear program.
Pakistan plans to build its first LNG receiving terminal at Port Qasim, near Karachi. In 2008, the government chose 4Gas, a Dutch-headquartered developer of LNG terminals, to build the facility. Carlyle Group and Riverstone Holdings LLC are the largest shareholders in 4Gas. 4Gas recently won the right to build a floating terminal off Karachi to store LNG supplies while it is constructing the larger receiving terminal.
Some critics say imported LNG will be too expensive for the Pakistani market, however, and are urging both the development of gas pipelines with Iran and the development of the nation’s massive but untapped coal reserves. By TOM WRIGHT
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