GDF Suez keeps US$25bn gas contract
By Syed Fazl-e-Haider

KARACHI, Pakistan – Paris-based GDF Suez, which earlier this year faced the loss of a US$25 billion contract to supply Pakistan with liquefied natural gas

(LNG), is to be awarded the contract after all.

The contract to import 3.5 million tonnes of LNG annually for 20 years was held in abeyance in April when the Pakistan Supreme Court reacted to media allegations that the lowest bidder had been ignored and ordered that the entire bidding process be reviewed. The LNG contract, part of a supply and regasification project known as Mashal, had been awarded to GDF Suez in February.

Local analysts believe the latest decision to grant the contract to GDF Suez is due to concern over the country’s widening energy

// <![CDATA[// <![CDATA[
//<![CDATA[
var m3_u = (location.protocol=='https:'?'https://asianmedia.com/GAAN/www/delivery/ajs.php&#039;:'http://asianmedia.com/GAAN/www/delivery/ajs.php&#039;);
var m3_r = Math.floor(Math.random()*99999999999);
if (!document.MAX_used) document.MAX_used = ',';
document.write ("”);
//
// ]]>shortfalls and the ramifications a contrary decision would have for investor confidence.
Prime Minister Yousuf Raza Gilani, who was given a presentation on the LNG project, approved the contract to the companies already selected by the Petroleum Ministry, according to a report in the Dawn newspaper. The government also decided to provide a fresh opportunity to other parties for importing additional quantities of LNG in the short and medium-term, without affecting the Mashal project, which is crucial to meeting the country’s gas shortfalls and resolving its energy crisis.

“A summary for re-approval of contract for setting up of LNG terminal and supply of 3.75 million tons of LNG will be presented to the Economic Coordination Committee [ECC] of the cabinet at its next meeting,” Dawn quoted an official as saying. “If the process is started afresh, the government will have to pay more.”

The Supreme Court in April took a suo moto (on its own initiative) notice on the basis of a media report claiming senior officials at the Petroleum Ministry awarded the multibillion dollar contract to import LNG to the French firm while ignoring the lowest bid jointly filed by Fauji Foundation and the multinational energy firm Vitol.

GDF Suez and Holland-based 4Gas, which is to build the terminal for the Mashal project, were reported not to have been in attendance for the Expression of Interest and bidding parts of the project as required. GDF Suez had welcomed the court’s decision to investigate the allegations made against its contract.

Pakistan is likely to depend over the next two decades on timely realization of two key projects – a gas supply by pipeline from Iran and LNG imports – to ease its worsening energy crisis. The Iran-Pakistan (IP) pipeline project is in jeopardy from US-led sanctions planned against Iran over the Islamic republic’s alleged nuclear policy, making LNG imports a priority.

Cancellation of the deal with GDF Suez on the grounds that the contract awarding process was awash with irregularities opened a Pandora’s Box.

The Petroleum Ministry’s special secretary G A Sabri told the Supreme Court in April that GDF Suez had applied neither for the short term (five-year) contract to supply 3.5 million tonnes of gas nor for the long-term (20-year) deal, as required under the bidding laws. The French company was given both contracts, worth $25 billion, in February by the ECC on the recommendation of Petroleum Ministry officials. Sabri also told the court that Sui Southern Gas Company (SSGC) had recommended giving the short-term contract to a unit of Shell through a letter dated May 2, 2009, without calling any tenders and bids.

GDF Suez was introduced by the same team which helped the sale of three Agosta submarines to Pakistan, Business Recorder reported in April. The $1.24 billion submarine deal was struck during the late Benazir Bhutto’s second tenure as prime minister in 1994. Her husband Asif Ali Zardari, now the country’s president, was alleged to have received $4.3 million in kickbacks for the deal, French daily Liberation reported late last year, citing documents it had received.

The Pakistan government took serious exception to the claims, The Times of India reported at the time, quoting a spokesman who said such purchases were done through a proper competitive process under the supervision of the Ministry of Defense.

Syed Fazl-e-Haider (http://www.syedfazlehaider.com) is a development analyst in Pakistan. He is the author of many books, including The Economic Development of Balochistan (2004). He can be contacted at sfazlehaider05@yahoo.com