KARACHI, Dec 7: On Monday, (Dec 11), the government would put up for bidding 100mmcfd of gas from Qadirpur gas field for setting up a new fertiliser plant, sources in the industry confirmed on Thursday.
Four parties (two local and two foreign) already pre-qualified to participate in the bidding process include Fauji Fertilizer; Engro Chemical; IPIC (International Petroleum Investment Co.) and Orascom.
It would be for the first time in the history of the country that bidding would be held in order to choose a party which would build a new urea plant. “Due to the shortage of gas, the government cannot allocate more than one gas field to the industry due to its own growing energy needs”, says analyst Atif Malik at JS Capital Markets. Since there are several contenders, it is only fair to allocate the field through a transparent bidding process.
The gas auction was earlier scheduled to be held on October 31, almost a year after the idea of allocation of 100mmcfd gas from Qadirpur field was first floated by the government. Two years of continuous import of urea to meet local demand had taken its toll on the exchequer.
Statements of Qualifications (SoQs) were called in July 2006, in response to which 13 parties showed their interest. But among those, only four could make it to the pre-qualified stage.
Analyst Atif observes: “We expect all four parties to bid aggressively for the gas owing to their strong financial standing”. The government was estimated to be able to raise a sum in the range that appeared as wide as between $30m and $100m.
Ali Hussain, CFA head of research at Invest Capital & Securities commented: “Local companies have an edge over the foreign participants in terms of their experience in the fertiliser industry of Pakistan”.
He said that the project cost was also expected to be about 15-20pc lower for the local players. Moreover, they were expected to complete the project sooner than their foreign counterparts.
But the analyst remarked: “Nonetheless, in terms of financial strength, the foreign players are expected to give a tough time to Engro and FFC for the gas bidding.
Finally, the government’s inclination towards encouraging foreign parties will also play a role”.
Analyst Atif worked out that aside from the bid money, the actual plant construction cost for existing players, FFC and Engro could be around $700-750m since it would be a brown field project for them as they already have related infrastructure and engineering services. For new entrants, IPIC and Orascom, the cost of the project was likely to amount to close to $1 billion, said the analyst.
