Simple facts

September 02, 2019

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The writer is a lawyer, and the host of a television show.
The writer is a lawyer, and the host of a television show.

COMPLEX investigations often bring to the fore certain beautifully simple facts. The use of the Calibri prior to its commercial availability in the Sharif family trust deeds and the dead man paying import duties on Zardari’s bulletproof vehicles are two examples. Out of the heavily numbered and layered factual jumble, they emerge as beacons towards which all ridicule can be safely guided. They act as proof of smoke where further investigations must now find fire.

All investigations must first begin with the most basic question: what are you trying to answer? If the question is ‘is there evidence of irregularity?’ the answer must be ‘yes’. There is a dead man paying for duties for someone accused of keeping money in other people’s names, and a font being used that didn’t officially exist by a family accused of doctoring the timeline of its ownership of property.

‘Behind every great fortune there is a crime’ is a simple answer, but is thankfully not the standard criminal investigations can progress upon; because beautifully simple facts are not married to simple answers. Often, the relationship is complicated enough to lead to a fundamentally flawed investigation if ignored.

Here’s another beautifully simple fact: $272,000 a day payable to Engro Elengy. It formed the basis of all allegations of impropriety against the procurement of the LNG terminal by the government through then petroleum minister Shahid Khaqan Abbasi. That a company was to invest about $150 million and get a guaranteed return of ten times the amount over 15 years through daily payments is another simple deduction which follows therefrom.

All investigations must first begin with the most basic question: what are you trying to answer?

What is ignored is the whole truth. Pakistan at the time was burdened with private power projects running on oil, all guaranteed capacity charges in dollars. These guarantees mitigate risks and are the norm for all large investment in unstable economies. The capacity utilisation of power projects across the country was vastly inefficient, due in part to the expense of fuel. These inefficiencies were compounding a chronic power production shortage. On the other end, our gas reserves were drying up and needed independent redressal. Attempts were made in 2006 to float the mother of all contracts, where LNG was to be imported, stored, regasified, transported and supplied. This took years to shape into a tender, which failed due to its girth and the demands of an increasingly desperate state apparatus. The project was then broken into two pieces, and the supply network was separately tendered. The amended regimes got to the Supreme Court, where their opacity was deemed enough for the process to be restarted by an Iftikhar Chaudhry then looking for a legacy in his power to dismantle alone.

Back to square one in 2013, there entered a PML-N government intent on securing another term off the back of a resolution to the deepening energy crisis. The LNG project was given to Shahid Khahqan Abbasi’s ministry to pilot. From there, it was ‘unbundled’, and the many billions required became the billion dollars required at each separate stage. The arrangement of supply of the LNG became PSO’s domain, the piping of the RLNG became SSGC’s project and the distribution tasked to SNGPL. All that remained was for someone to build the RLNG terminal, to which PSO would arrange gas supply and from which SSGC would pipe gas.

No one was hopeful of a successful tender process, because of the experience of the past, the uncertainty of the present and the near guarantee of a changing regulatory future. Two bidders were shortlisted and thoroughly vetted by an independent international firm of technical repute. Only one qualified, with the second falling just short, failing to adequately qualify their technical assertions within time. The successful bidder initially sought international investment, but none was forthcoming. They then invested $150m of their own money, and once the basics of the terminal were in place, they attracted enough interest to raise $450m in financing for the actual terminal operation, which amongst other things involves LNG being cooled and kept at -160 degrees Celsius — a continuously delicate, dangerous and energy-intensive task. The insurance costs, financing payments and actual terminal operation costs in themselves were estimated to run upwards of a billion dollars over 15 years, an amount the government had technically validated and then assured by way of daily capacity payments of $272,000 per day over the first year, and later $228,000 per day over the remaining life of the agreement.

Incidentally, the second bidder was successful in a later bidding process and was awarded the second LNG terminal contract in January 2018. The capacity charges awarded to them are $240,000 per day.

Meanwhile, the government, heading the tripartite bargaining entity of the PSO, SSGC and SNGPL, had succeeded in playing off interested gas suppliers against each other, resulting in what financial publications were calling a bargain of a gas supply agreement which saved the country $610m.

When the terminal came online, in record time, the power generation units operated by the government were simultaneously switched to LNG, shut down projects were revived, private power producers were adequately supplied, saving billions of dollars in fuel costs. The supply demand gap of energy contracted by thousands of megawatts. Indirect advantages in the shape of billions of dollars more of economic activity were made possible due to power now being available.

Give the team behind it a medal, you say? NAB gave them a questionnaire. Among the questions was “why would you get an LNG terminal when an LPG terminal existed”. Our former premier answered by saying the two have nothing in common other than sounding alike. Then they put forward their beautiful simple facts: “why did you award the tender at an astronomical cost of $272,000 a day,” which is more than a billion dollars guaranteed over 15 years? And the answer was lost in the noise of another former prime minister being arrested.

The writer is a lawyer, and the host of a television show.

Twitter: @jaferii

Published in Dawn, September 2nd, 2019