PPRA rules: LNG cargoes given 6-month exemption

The Board of Public Procurement Regulatory Authority (PPRA) has exempted procurement of 27 LNG spot cargoes from applicability of PPRA Rules for six months (January 2022 to June, 2022) to be procured by Pakistan LNG Ltd (PPL), official sources told Business Recorder.

This decision was taken at a meeting of the PPRA Board held on January 24, 2022, under the chairmanship of Secretary Finance, Hamed Yaqoob Sheikh.

Following the decision, the Petroleum Division has also convened a meeting of Price Negotiation Committee on February 11, 2022 to discuss import of LNG under G2G basis from Qatar.

According to a letter written by Masood Nabi, Managing Director, PPL a detailed presentation will be given on enhancement of supplies from Qatar under existing contracts, in addition to discussion on strategy to approach Qatar and possible implications of price review and renegotiation of existing Qatar contracts

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To justify the proposal of exemption from PPRA rules, MD PLL stated that LNG spot prices have been very volatile and procuring the cargoes has become a challenge. He further apprised that the State Owned Entities (SoEs) of other countries ask for a very limited time of the bid validity otherwise the bidders do not lock their bids, and resultantly cargoes are sold within a day elsewhere due to price volatility of the spot cargoes.

MD PLL explained that with the exemptions granted in the past they have been following the process of three-day response time and award the tender on the same day which resulted in procuring the spot cargoes efficiently. Hence, as per earlier precedence, exemption from applicability of rules 13(1) and 35 for procurement of approximately 27 spot cargoes to be procured within the next six months, ie, January 2022 to June, 2022 may be granted to PLL.

Hannan Ikram, Private Board Member stated that globally there are few companies that trade in LNG. In the spot market, decisions have to be made within an hour. The traders are not going to sit and wait for the tenders to be published in the newspapers with given timelines of 30 days. He further highlighted that this spot procurement procedures and rules should be extended to all energy commodities such as diesel, gas, crude etc. It is critical to get Petroleum Division’s input on the market dynamics of the spot market for energy commodities and for this purpose Petroleum Division should be reached soon.

Secretary Petroleum Division endorsed the views of Hannan Ikram. Secretary Water Resources opined that not only the energy and food but other sectors of the economy are also facing the same issue so rather than allowing exemption on case-to-case basis, the government should go with the fundamental redressal of the issue as proposed by Secretary Petroleum and Private Board Member.

Secretary Communications invited the attention of PPRA Management regarding directives of PPRA Board in previous meetings regarding the proposal of amendment in rules as a permanent solution. DG (M&E) noted that new generic rule is proposed as a separate agenda item keeping in view the issues faced by the different Ministries and Divisions including PLL and Trading Corporation of Pakistan (TCP).

Secretary Communications asked whether the same rule was shared with the stakeholders, and if not, the same should be shared with the stakeholders especially the Petroleum Division and Industries and Production Division. DG (M&E) argued that the same rule will be shared with these Ministries to make it more appropriate for its applicability in all relevant sectors including petroleum products and commodities to be procured through international tendering.

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Secretary Petroleum maintained that since he had not perused the respective rule hence it would be in the fitness of things if exemption is recommended by the Board separately to the extent of 27 cargos of PLL.

Secretary Defence Production stated that although spot procurement of LNG is a genuine call and leverage with certain conditions may be allowed however granting general exemption to a specific sector would violate the spirit of these rules. For example, strategic reserves of wheat or sugar would definitely require further details to consider their peculiarities specifically related to spot procurement.

He further contended that the Board should recommend the exemption on case to case basis and the same should be thoroughly evaluated by the Cabinet otherwise general exemptions and sector specific amendments if left alone would create a problem later on.

After thorough deliberations, the Board decided that Pakistan LNG Ltd. (PLL) may be granted partial exemption under section 21of the PPRA Ordinance, 2002 from applicability of rules 13 and 35 of Public Procurement Rules, 2004 for the procurement of LNG through spot procurement of 27 cargoes for PLL till June 30, 2022 to the extent of defining reasonable response time and duration of bid validity after announcement of evaluation report.

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