ISLAMABAD: The government on Wednesday allowed export of 200,000 tons of sugar and approved import of one billion cubic feet per day (1bcfd) of liquefied natural gas (LNG) in three phases through competitive bidding. The first gas delivery is expected after 12 months.

The decisions were made at a meeting of the Economic Coordination Committee (ECC) of the Cabinet, presided over by Finance Minister Dr Abdul Hafeez Shaikh.

Dr Asim Hussain, the prime minister’s adviser on petroleum and natural resources, told journalists that 1bcfd of LNG would be imported through two long-term projects of 400mmcfd (millions of cubic feet per day) each to be completed in over 30 months and 200mmcfd through fast track process to be completed in 12 to18 months.

Under the long-term projects, tenders will be floated for integrated mechanism, including LNG purchases in international market, setting up of LNG terminals and re-gassification of LNG, he said. The Sui Southern Gas Company (SSGCL) had appointed a consultant for preparation of tender documents so that competitive bidding could take place under procurement rules, he added.

In reply to a question, the adviser said interested parties, including four already having LNG licences, a subsidiary of a bankrupt 4Gas that had won a previous LNG project but could not complete it because of legal issues, and any new entrant, would be allowed to bid for the long-term projects.

After the first round of bidding for first 400mmcfd of LNG, the bidding for second 400mmcfd gas would be conducted, he said.

“The two long-term projects will have gas sales and purchase agreement for 10 to15 years.”

The short-term project for import of 200mmcfd would be handled on fast track basis by a special purpose vehicle (SPV) — a joint venture of the SSGCL, the Sui Northern Gas Pipeline Limited, any interested private party and public investment out of gas infrastructure development currently being collected from gas consumers, he said. The SPV will utilise the existing gas terminal purchased from Progas by the two gas utilities.

In both cases (long- and short-term import), the LNG will be procured through any of the three options i.e. spot purchases, direct negotiations and long-term competitive bidding, Mr Hussain said.

He said the ECC decided to provide imported LNG mainly for power sector and to other large bulk consumers who would be provided the gas through separate transmission network isolated from national transmission system, to avoid system losses.

Given the fact that LNG policy restricted provision of government guarantee for LNG imports, an official said, an amendment would be introduced to enable the government to provide sovereign guarantee to the three months of rolling letters of credit by the gas utilities to the gas seller/importer. The gas companies would be provided letters of credit by the gas purchaser or power sector, he said.

Likewise, he said, another amendment would be introduced to solicit trade guarantees from multilateral lending agencies. For the first 200mmcfd of LNG, a guarantee amount of rolling letter of credit for 90 days has been estimated at about $350 million.

The ECC decided not to change gas tariff for existing consumers as a result of expensive LNG imports that would be used as pass through fuel cost in power tariff, said the adviser.

The LNG imports would be allowed only if they were substantially cheaper than furnace oil, he added.

An official said LNG import price beyond 75 per cent of furnace oil would not be accepted.

SUGAR EXPORT: The adviser said the ECC was requested to allow export of 400,000 tons of sugar by the commerce ministry in view of an expected surplus in the coming seasons. But the committee allowed export of only 200,000 tons in the first phase.

Every sugar mill would be given a quota of 10,000 tons.

The ECC constituted a committee — comprising the prime minister’s adviser on agriculture and the secretaries of commerce and industries, to find out reasons for non-utilisation of the export quota approved earlier. The quota involved as much as 166,000 metric tons of sugar.

The ECC also discussed a summary proposing import of 500,000 tons of urea. After evaluating different aspects, it constituted a committee — comprising the deputy prime minister, the (senior) minister for industries, the minister for petroleum and natural resources, the deputy chairman of the Planning Commission and the industries secretary — to further work on subsidy mechanism, price fixation formula for fertiliser and gas availability to fertiliser plants, after consultation with the fertiliser industry.

The ECC approved renewal of a government guarantee of Rs2billion for the Pakistan Steel Mills until March next year for its operational requirements.

The committee approved grant of indemnity for implementation of hydropower projects in Azad Jammu and Kashmir (AJK) to the effect if the AJK Implementation Agreement or Water Use Agreement became illegal, void, invalid or unenforceable due to change in laws of the AJK or Pakistan, Islamabad shall indemnify the project company or the lenders for any cost, loss or liability resulting from such illegality, invalidity or unenforceability.