$1 billion LNG scam lands in federal cabinet

Monday, March 29, 2010

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ISLAMABAD: The first documented $1 billion scam was laid before the federal cabinet last week which officially revealed that Pakistan lost one billion dollars after the top guns of the Petroleum Ministry ignored the lowest bid of the Fauji Foundation and the multinational energy firm, Vitol, for 3.5 million tons LNG contract worth $25 billion, and instead awarded it to the highest bidder, a French firm.

The official documents presented before the cabinet and available with The News reveal that the mega scam might have been buried in the official files had MD Fauji Foundation Lt General Rab Nawaz not strongly protested with the then Finance Minister Shaukat Tarin. The MD FF wanted to know why the lowest bid was ignored, causing the national exchequer a $1 billion loss. When contacted by The News, former Finance Minister Shaukat Tarin confirmed that Pakistan lost $1 billion on account of awarding the contract to a French company.

He, however, made a bold confession that he was not provided full details of the actual prices quoted by the potential bidders by the ministry of petroleum when the Economic Coordination Committee (ECC) headed by him took the decision. The scam came to light when the cabinet division presented the decisions of the ECC before the cabinet meeting presided over by Prime Minister Yusuf Raza Gilani. The official documents showed that even the prime minister and his cabinet ministers did not have any idea about it as every thing was done and managed by the ministry of petroleum and natural resources and the ECC.

When the ministry of petroleum invited bidds for 3.5million tons LNG contract, Fauji Foundation and Vitol had jointly offered the lowest bid. Vitol, a Netherlands-based multi-billion dollar oil conglomerate was founded in 1966. Vitol is a big name in world energy trading. It ships over 300 million tons of energy products per year and it had revenues of around $143bn in 2009. When the ECC, then headed Shaukat Tarin, awarded the contract to the French firm, Lt General Rab Nawab called him to know why their joint bid was not entertained despite being the lowest.

But, by then, it was too late as Tarin had already awarded the contract to a French company considering it to be the lowest bidder, which was not the case. It was later revealed in the subsequent ECC meetings presided over by Tarin that the Vitol/Fauji proposal was not even presented before the bidding committee of the ministry of petroleum and natural resources. The bid was not even mentioned in the official summary to keep Shaukat Tarin in the dark and to get a decision in favour of the French company.

The documents showed that when Tarin got the call from MD FF, he immediately wrote a letter to the minister for petroleum to know how his ministry could ignore this lowest bid, which could have saved $1billion. The official report (available with The News) revealed that the minister for petroleum had explained in the ECC the “complaint of Vitol/Fauji Foundation was based on misconception”.

The documents quoted Naveed Qamar as saying “in fact Vitol/Fauji came very late to bid for this multi million dollar contract”. But, sources aid, this did not satisfy the finance minister who wanted to know why it was not mentioned in the summary. Talking to The News Shaukat Tarin said it was true and he had tried to probe the shocking scam before leaving the office last month. But, Tarin said, he was not aware of the latest development on the issue because the petroleum ministry did not reply to his letter.

Tarin said the Vitol/Fauji bid was never brought before the ECC by the ministry of petroleum and he came to know about it only after MD FF called him.

But, he said, by then it was too later as the decision had already been taken on the basis of information provided by the ministry of petroleum and natural resources. “Let me assure you that had I been informed about this lowest bid of FF/Vitol by the ministry of petroleum when the summary containing the names and offered prices of all the bidders, was presented before the ECC for my decision, I might have awarded this contract to Vitol/Fauji”, Tarin said.

He also claimed: “I was never given the full picture by the ministry of petroleum and when MD FF telephoned me I sought the details of this huge lapse from the ministry of petroleum. But its reply never reached my office till my departure from the ministry”. Talking to The News, federal secretary petroleum Kamran Lashari said this contract was awarded before he assumed charge of the ministry. Secondly, Mr Lashari said, additional secretary Mr G A Sabbari was dealing with the LNG contract issue. He, however, confirmed that this issue was recently raised in the ECC again where he was present.  

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Mr Lashari said he could not tell anything more about it, as he was not dealing with it. Talking to The News from Karachi, the federal petroleum minister Naveed Qamar denied all these charges and claimed that FF/Vitol offer did not suit the specific requirements of the ministry and its huge contract. He said actually Pakistan badly needed LNG to meet its rising energy requirements on an urgent basis and he had set December 2009 as the deadline to strike this deal to import 3.5million tons of NLG.

He said we had identified four concerned parties with the option to allow anyone to participate in the bidding for this contract. He said we had even talks with Shell which was representing Qatar which had huge reservoirs of energy.

The minister said we tried to directly negotiate with the Qatar government but it asked us to make a deal through Shell. He said Vitol was only offering to supply half the required amount of NLG along with terminal and this did not suit us. He said although price quoted by Vitol/FF was comparatively low, but we need to understand that they were only offering to supply for five years and more importantly they were not bidding for 3.5million tons.

He said after evaluating all aspects of this multibillion dollars deal, the present contractor was recommended for award of the contract as it suited our requirements from all aspects. Naveed Qamar confirmed that Shaukat Tarin had asked him in the ECC meeting why his ministry did not mention the offer of FF/Vitol along with the summary seeking the award of contract to one party.

Mr Qamar said now this was the job of the petroleum ministry to use its own wisdom to see what suited our interests and then make its recommendation to the ECC. He confirmed that his ministry did not mention the offer made by Vitol/FF in its summary to the ECC. But he claimed it was done because the bidding offer by the Vitol did not suit us.

He claimed that if he did not mention specific information about the offer price of Vitol/FF in the official summary, then it was not something scandalous or big to be made an issue against him. Naveed said he had even explained to Vitol that their offer did not suit our requirements.

But, the minister said: “I don’t know what went wrong somewhere that all of a sudden MD FF started writing against him to the prime minister’s secretariat and contacted Shaukat Tarin to lodge complaints against me”.

He claimed that MD FF had even contacted ISI to lodge complaint against him in this regard. Naveed Qamar denied any wrong doing in this multibillion dollar deal to import 3.5million tons of LNG and said Pakistan’s interests were given priority over anything else.

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