ISLAMABAD: With relaxed procurement rules, Pakistan has sought eight import cargoes of Liquefied Natural Gas (LNG) at fixed dollar price and tight tendering schedule for delivery between April 30 and June 28.
Pakistan LNG Ltd (PLL) — one of the public sector entities responsible for LNG import — on Monday invited bids for delivery of eight cargoes in May and June and set the deadline of March 30 (almost a week time). The company would also be reducing the time between bid evaluation and award of the contracts.
The bids have been invited for one cargo delivery on April 30, followed by four weekly cargoes in May and three in June.
“Bidders are requested to review the Bid Document carefully as some key reforms in the process have been implemented”, wrote the PLL on its website. The company has also asked the bidders to offer their bids in fixed dollar price instead of slope linked to Brent crude price.
Tight tendering schedule will help secure economical shipments
Except for a few emergency tenders a couple of months ago, the PLL had always sought bids as percentage of Brent crude price and with longer terms for bidding, bid evaluation, award of contract and holding bidders for longer period.
This resulted in various forms of limitations and higher bid prices as suppliers had to hold on their ships and LNG. This was unlike private spot players who could make final decisions on a short notice.
Late last month, the Federal Cabinet had granted partial exemption to PLL from Rule-35 of the Public Procurement Regulatory Authority (PPRA) rules by relaxing the period between announcement of evaluation report and award of tenders for spot cargoes. More than half of Pakistan’s total LNG imports are based on long-term contracts while the rest of the required quantities are met through spot tenders.
The board of directors of PPRA led by secretary finance had recommended relaxations in its rules to the cabinet saying this would help secure economical and reliable spot LNG cargoes.
Under criticism for tendering process this winter, the Petroleum Division had demanded that mandatory period between evaluation of bids and award of contract should be reduced from about 15 to two days for a specific emergency case.
It also wanted exemption for reduction in 30-day response time which always exposed PLL to situations where following PPRA timelines, insufficient time was left for the vessel’s voyage, besides causing less competitive bids resulting in costly LNG procurement.
Under Rule-35 of PPRA, the bidders are required to keep their bids valid for 10-15 days, which is quite a long period as compared with industry norm of 1-2 days of bid validity period. The longer-term entailed risk of supplier withdrawing the bid to avoid financial exposure on account of bid bond or go for higher profit bid.
There were also specific cases this winter when suppliers defaulted on LNG delivery, let bid bonds confiscated and sold gas at 35pc higher rate as market went up, leaving little time for the PLL to have second bid for replacement. It was reported that Pakistan’s spot tenders had the longest bid validity period when compared with rest of the LNG buyers.
The PLL has said the commercial offers for each should set out the price for that each respective cargo. “PLL will evaluate each commercial offer based on the lowest Contract Price (CP ) in US$/mmBtu offered by any compliant bidder for that LNG cargo”. Bidders are required to separately bid for LNG cargo based on US$/mmBtu only. The CP applicable to the LNG cargo shall be rounded to four decimal places in order to assist in selecting the lowest CP in dollar per unit.
Published in Dawn, March 23rd, 2021