ISLAMABAD, Dec 21: The ministry of law has asked the petroleum ministry to go for fresh bidding of both long- and short-term LNG import projects and not to waste time by insisting that contract be awarded to a consortium of European and US companies.

In a rejoinder sent to the petroleum ministry on Dec 8, the law ministry said it had not been provided with additional documentary evidence to suggest that the proposed contract for 3.5 million tons of LNG import to a consortium of 4Gas was in line with the decision of the Supreme Court of Pakistan. Hence, there was no reason for the law ministry to withdraw its earlier legal opinion calling for fresh bidding. It said the petroleum ministry should have avoided wasting time by initiating the project afresh soon after its earlier legal advice.

This was confirmed by Petroleum Secretary Imtiaz Qazi who told the Senate Standing Committee on Petroleum that the law ministry had again called for re-tendering of the project, but said it would consume about two years' time.

Mr Qazi said the Mashaal LNG project was initially delayed because of the Supreme Court taking notice of the bidding process. He said after the apex court's judgment, the petroleum ministry took the case to the ECC to allow the ministry to move ahead by awarding the contract to the 4Gas consortium. The ECC sent the case to the law ministry to determine if it was in accordance with the Supreme Court judgment.

He said the law ministry desired the re-tendering of the project, but “we realised that it would take at least two years and hence we went back to the law division and requested it to separate the two projects and issue no objection to Mashaal project implementation”.

He said the law ministry again called for re-tendering of both short- and long term projects and the project got stuck.

He said that the political leadership was trying to resolve the issue and the petroleum minister had taken it up at the political level. He said there was no wrongdoing in the selection of 4Gas consortium, but the law division had become a stumbling block.

Meanwhile, sources said the consortium partners comprising US and European companies, who had earlier threatened to walk out of the project, were now considering to seek contempt of court proceedings before the Supreme Court against the government on the grounds that the court decision had not been implemented. They said the Supreme Court had directed the government in its final judgment to “put up a summary relating to the Mashaal Pakistan Project before the ECC for a fresh decision for awarding the contract for supply of LNG to 4Gas, the developer declared qualified by the consultant SSGCL”.

They said the re-tendering of the project as “reportedly advised by the ministry of law was contrary to the text of the judgment and amounts to contempt of court and gives rise to claims against the government”.

They said that in line with the court judgment, the 4Gas consortium resubmitted integrated LNG (supply and regasification terminal) proposal based on GDF Suez offer for LNG supply and provided support letters from Carlyle/ Riverstone, AtlasInvest and International Finance Corporation and spent $10 million on the project development to meet tender requirements.

They said the Supreme Court did not question the selection of 4Gas as developer of the project nor was 4Gas a party to suo motu proceedings. The court, they said, did not revoke the ECC's earlier decision to award terminal development to 4Gas.

The US-based influential Carlyle/ Riverstone Group and Atlas Invest which are major shareholders of 4Gas — the main sponsor of 25-year Mashal LNG import project — have already conveyed their full financial support to the project implementation.

The sources said that apparently the project had become a victim of conspiracies of the furnace oil and liquefied petroleum gas (LPG) lobby because the LNG would be competing with these two expensive fuels. Petroleum ministry officials said that replacing the furnace oil based electricity generation with 3.5 million tons per annum of LNG would save between $30-50 million per month at the current rate.

The officials said the country would be paying about $2 billion (Rs170 billion) extra in just two years for import of furnace oil to meet electricity shortfall instead of less expensive LNG. The additional burden on the economy over the 20-year life of the project could go beyond $40 billion, according to conservative estimates, even if the overall cost to economy was not taken into account.