Pakistan LNG deal declared null and void

The Supreme Court today told the Pakistani government to pull the plug on the LNG deal with GDF Suez worth US$ 25 billion. They have also advised that a new summary of bids for the project be prepared for submission to the Economic Coordination Committee, (ECC) who made the decision on which bid to accept in the first place, this time they want the lower bid from the Fauki Foundation/Vitol to be included. They have also advised that action be taken against ministry staff that are held responsible for the bidding irregularities.

The reason this extraordinary measure is that when all the bids that were put in for supplying LNG were presented to the ECC, a joint bid was ignored from the Fauji Foundation, a Pakistani investment group, and Vitol, the European energy supplier. The former head of the ECC, Shaukat Tarin, reported the irregularity after being questioned by the Fauji Foundation about why its bid had not been accepted. Media speculation followed which alleged that by ignoring this lower bid, Pakistan had lost US$ 1 billion. The Supreme Court did not speculate on the matter of billion dollar losses but did criticise the lack of transparency in proceedings. The Petroleum Ministry has already agreed to resubmit all tendered bids to the ECC and restart the process to ensure full transparency.

The project requires 3.5 million tpy of LNG and Pakistan desperately needs the LNG. The government announced plans last week to cut state electricity consumption by up to half as the country has been facing rolling power cuts which can last from 6 – 8 hours a day in cities and are stifling economic development. At a time when the Pakistani government is battling the Taliban insurgency, which is making them something of a international pariah and damaging their economy, the last thing they need to add to their woes are power shortages. This slow decision making process behind energy deals may not help attract the foreign investment that Pakistan needs if this is to avoid further economic chaos.

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