Multi-billion-dollar scheme: Secret deal for LPG/NGL extraction project

Friday, December 16th, 2011 9:44:52 by



Amid the roaring Rental Power projects controversy that fuelled speculations and added to the woes of Prime Minister Yousaf Raza Gilani’s cornered government, the Oil and Gas Development Company is set to strike a secret deal with JJVL, a Lahore-based LPG tycoon, for a multi-billion-dollar award of contract.

The contract is for LPG/NGL extraction project in the Kunnar Pashakhi field, which is among the most promising oil and gas reservoirs, containing a huge quantity of the much-needed LPG/NGL. It will contribute over 150 mmcfd of gas to the distribution system.

OGDC, instead of negotiating a better deal through an open and transparent bidding process for the benefit of the country, preferred to secretly negotiate with JJVL the terms and conditions of the contract much before issuing the press tender for the contract.

A JJVL letter to OGDC for this project shows a difference of over two months in their pre-bid correspondence.

A pre-bid correspondence is sheer violation of Public Procurement Regulatory Authority (PPRA) rules, as it puts other parties at utter disadvantage. It’s also a question mark on OGDC’s own procurement rules, which stresses for complete transparency in the award of procurement contracts that involve huge public money.

The OGDC and JJVL pre-bid correspondence, copies of which are available with Express Investigation Cell (EIC), indicates how the concerned OGDC officials spin the ball when they get ready to compromise on the national interest to give undue financial benefit to a selected party. It also makes abundantly clear who is who in the award of this multi-billion-dollar contract.

The question arises as to what inspired OGDC officials to illegally pass on secret information to JJVL before issuing a press tender for this contract.

The JJVL letter dated September 8, 2011 duly signed by its Resident Director, Anees Ahmed Ansari, addressed to General Manager Projects OGDC Zahid Bakhtiar said, “Kindly refer to our meeting with you at OGDC House on August 10, 2011, that after evaluating the data provided by you we remain interested in entering into a gas processing agreement with OGDC and propose provisions/heads of the agreement to be incorporated in the final gas processing agreement.”

Other facts gave a new twist to the story. For example, JJVL’s September 8 letter and the tender issue date show a difference of about two months.

JJVL’s proposed processing fee of 45 per cent of LPG/ NGL price speaks all about the intention that allured OGDC for pre-bid negotiations with JJVL.

JJVL’s proposed rate of processing fee stuns many in the oil and gas industry. “The processing fee in such projects cannot exceed five to six per cent,” industry sources said.

The two-year contract period is even more intriguing. Such a short period was apparently meant to make sure that other parties stay away from the process and JJVL gets the contact for this key project without any hassle.

The LPG/ NGL project requires huge investment and a short period of two years cannot be an attraction for any company except JJVL, which posses the processing facility in the same area.  Since LPG/NGL is like hot cake in the market, OGDC got good response from the interested parties.

Initially five parties – Kundi Construction Rawalpindi, Descon/ Presson Lahore, SKB Engineering Islamabad and High Rise Islamabad – showed interest to bid for the contract by purchasing the tender document. However, only two of them – Kundi Construction and JJVL – returned for the submission of bids to OGDC. The OGDC officials’ act of providing secret information to JJVL, a party that participated in the tender for getting the contract, is tantamount to sheer misconduct.  They, as per the official secret act, are liable to punitive action for this misconduct.

The petroleum ministry and other concerned departments should look into this issue of gross misconduct on part of the OGDC officials and take proper steps to make sure that JJVL or any other money mongering group does not get a multi-billion project contract through a secret deal.

When contacted for comments, OGDC acting managing director Basharat Mirza said, “The Kunnar Pashakhi LPG/ NGL extraction project is very important,” adding that his organisation will finalise its bidding process on “priority basis no matter how many parties come to contest for the contract.”

He denied that any party was given special favour in the tender process or otherwise. However, the JJVL correspondence denied the OGDC acting managing director’s claims.

OGDC is a golden asset with all potential to help the country cope with a roaring energy crisis but instead money mongers within and outside the organisation have turned it into a corruption hub.

It always welcomes lobbies and the influential to get undue benefit in the form of either LPG quota allocations or award of the contracts to selected parties in violation of PPRA rules. Many OGDC officials in the past have been jailed for their wrongdoings. The OGDC bid to award a multi-billion dollar LPG/ NGL extraction contract to JJVL through a shady deal can be referred to as a ready reference.

Published in The Express Tribune, December 16th, 2011.

Islamabad News Sources -2

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Posted by on Dec 16 2011. Filed under Business, Latest News, National. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

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