Law Ministry warns re-opening of past LNG terminal agreements to bar new investment

Aftab Ahmed

Islamabad: Law Ministry has warned the government of Pakistan Tehreek-e-Insaf (PTI) that re-opening past agreements of LNG terminals to rationalize excessive returns would result in barring investment by the new investors.

After coming into power, the PTI government had decided that petroleum and finance divisions would conduct negotiations with LNG terminal companies for rationalizing the excessive returns being earned by them.

Officials of the Petroleum Division had informed earlier to the competent forum that the rate of equity and investment for the first LNG terminal was 15% while the rate of investment for the second terminal was 15.4%.

However, Ministry of Law had had opposed re-opening of the past agreements with terminal companies and warned that new investors would by shy of investment if past contracts were re-opened. It said that LNG terminals were fully operational and negotiations with terminal operators were not feasible at this stage.

Sources told that the Prime Minister Imran chaired a high level meeting and he was informed that National Accountability Bureau (NAB) was negotiating one of the terminals- Elengy Terminal Pakistan Limited (ETPL).The government has decided now to pen the negotiations with the LNG terminal operators till finalization of NAB inquiry in the LNG terminal matter.

Earlier, Economic managers had observed that the LNG terminal operators were making hefty returns on their investments. They said it was essential to review and revisit the LNG terminal agreements to explore the possibility of amendment and revision.

Following this development, the ECC had directed the Petroleum Division to seek legal opinion from the Law and Justice Division on the LNG terminal agreements to find out whether it was possible to re-open agreements. The Law division had also suggested that amendment could be made with mutual consent. The Oil and Gas Regulatory Authority (Ogra) and the Petroleum Division were also directed to submit details regarding return on equity and investment related to both the LNG terminals for further consideration of the ECC.

The first LNG terminal was a brownfield project. The government, through the Inter State Gas Systems (ISGS), had floated open tenders for the terminal in August 2013. Elengy Terminal Pakistan Limited (ETPL) had won the bidding in line with Public Procurement Regulatory Authority (PPRA) rules. An open international bidding process was adopted by ISGS and the bidder with the lowest re-gasification cost was selected. Bids were evaluated by international consultant QED, hired by USAID.

LNG Services Agreement was signed with Sui Southern Gas Company on April 30, 2014 for 15 years. The cost of the project was $120 million excluding the Floating Storage and Re-gasification Unit (FSRU). Regarding the second LNG terminal, the Petroleum Division had informed the economic coordination committee that the terminal was a greenfield project. The government – through Pakistan LNG Terminal Limited (PLTL) – floated an open and competitive tender for its establishment in 2015. PGP Consortium won the bid for the project.

The ministry said the second terminal was awarded on build, own, operate (BOO) basis and was based on the commodity/tariff bidding model rather than the IPP cost-plus model. In the bidding, the bidder with lower re-gasification cost was selected. Rates were evaluated by consultant Galway International of Singapore.

The country had faced worst gas crisis during tenure of Pakistan Peoples’ Party (PPP) and PML-N had made energy crisis part of its election campaign to resolve this issue. During PML-N regime, the two LNG terminals were set up in Karachi with total capacity of over 1.2 billion cubic feet per day (bcfd) and country was not importing this volume from Qatar and some other traders to meet domestic demand.


These LNG terminals were pilot projects and efforts were made since Musharraf regime to set up LNG terminal but these efforts failed. However, PML-N made a successful story and now former Prime Minister Shahid Khaqan Abbasi was now facing trail in NAB.

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