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Gas Compressor Station
Asks Petrobangla to explain why open tender for GTCL project cancelled
As the prime minister sought explanation from Petrobangla chairman why he was so eager to award
Sources said the Prime Minister's Office (PMO) asked Petrobangla Chairman M Muktadir Ali to explain a host of issues related to the gas compressor scheme, including why the GTCL tender for compressors was cancelled and whether he had taken into cognisance 16 technical questions raised by a GTCL consultant.
While seeking the energy ministry's approval late last month for allowing installation of Chevron's compressor station over GTCL system, Muktadir concealed the fact that Chevron had not clarified the 16 technical questions.
The PMO sought the project files and explanation following a report in The Daily Star revealing this fact.
The chairman sent his response last week, apparently seeking the prime minister's permission for awarding the job to Chevron under the production sharing contract (PSC). Prime Minister Sheikh Hasina is expected to review the response today, sources said.
Petrobangla's move to award the deal to Chevron poses serious questions because the GTCL board headed by the Petrobangla chairman cancelled in May the GTCL tender to award Korean company Hyundai a contract to install three compressors under an Asian Development Bank (ADB) fund. The GTCL tender was opened in February, but the Petrobangla chairman had asked Chevron for this job in December last year.
PETROBANGLA CHAIRMAN'S RESPONSE
In his response, Petrobangla Chairman Muktadir Ali tried to justify why Chevron's compressor station should be installed in Muchai area on a priority basis instead of three at different strategic points of the country, saying installing the device would increase gas flow by 50-60 million cubic feet. This would improve gas supply pressure to Ashuganj and other areas.
He said the GTCL had floated tender for three compressor stations to improve gas supplies. But as it did not get responsive offers for all the three points and also did not have sufficient funds for the project, the authorities approached the ADB and got commitment for funding two compressors while resorting to Chevron for the compressor station at Muchai. Chevron earlier proposed to set up the station under its PSC with Petrobangla.
The Petrobangla chairman pointed out the financial and technical advantages of having Chevron's compressor over what he termed the "unresponsive" offer of Hyundai. He said Hyundai's compressor comes with a price tag of $44.47 million but Chevron's offer costs $52.7 million and its machines are bigger. Then he pointed out that the Hyundai compressor had 35,000 horsepower (HP) and Chevron's 45,000 HP.
Muktadir then defended why the GTCL board, headed by himself, had cancelled the tender in May by not taking a dozen clarifications from Hyundai as was suggested by the GTCL consultant. In a confusing statement, he said the consultant had said at the board meeting on May 9 that the clarifications were not acceptable and that in its clarifications, Hyundai had sought extra cost against some machines, which was not acceptable as per tender rules. Besides Hyundai's bid offer was 152 percent higher than the allocated budget.
On the question of ensuring transparency and competition in awarding Chevron the project, Muktadir pointed out that since Chevron's compressor had higher horsepower than that of Hyundai, its $53.7 million price tag was "justified". He added that if the government approves Chevron's offer, transparency in the project implementation can be ensured through "PSC obligations".
Then he went on to repeat article 15 of the PSC with Chevron for block 12, saying this clause allows Chevron to install a compressor as a cost recoverable investment. Under the PSC, Chevron would operate and maintain the compressor and upon cost recovery it would be handed over to Petrobangla and the GTCL would then operate it on behalf of Petrobangla.
SMOKE CLOUDS
Officials said the response from the person who himself is the source of controversy was once again misleading.
"Firstly, Chevron's proposal is unsolicited and it is being compared with the lowest bid of an open tender. This is immoral," said a competent GTCL source.
Chevron would install the compressor station on GTCL's system, not on that of Petrobangla. The GTCL is not a party to the PSC and it is not supposed to operate the compressor in its own system on behalf of Petrobangla. The PSC clause mentioned by Petrobangla is only related to Chevron's gas fields in Block 12.
He added that the letter to the PMO did not mention that Hyundai had proposed to resolve outstanding issues through negotiations and had not closed its doors when the GTCL board cancelled the bid.
"Spending $52 million for a compressor to increase gas flow of 50-60 mmcfd is not justified. Besides, an ADB consultant has determined that the compressor would actually increase gas flow by merely 9 mmcfd. The consultant recommended installing loop line in Muchai to improve gas flow pressure," he adds.
"It is ridiculous to compare two proposals based on only horsepower. Petrobangla has compared Hyundai's proposal based on some big compressor devices included in Chevron's proposal, which does not guarantee that this equipment complies with the GTCL tender requirements," he points out. "Computer analysis shows that Chevron's 45,000 HP compressor is so powerful that it would consume 5-6 mmcfd gas to run its turbine."
He said, "Transparency of this project cannot be based on horsepower. Besides, the GTCL did not ask for the higher horsepower Chevron is trying to sell. It looks like the Petrobangla chairman is trying to make the country buy whatever device Chevron has in its store to sell." He added that such imposition of a compressor on the vendor's terms is dubious. "It could be that someone has an old compressor that it was trying to get rid of," he noted.
The cost of Hyundai's compressor is actually $38.30 million, plus $6 million as VAT. This makes Chevron's proposal much costlier.
Again Chevron's proposal did not include equipment available in Hyundai's proposal. These are: certain spare parts metering facilities, off-take facility, office building, VSAT system, fire hydrant, online generator analysis etc.
"Chevron could not properly reply to the 16 questions raised by the project consultant, but the Petrobangla chairman claimed that these have been resolved," he said.
"The whole process is not transparent. PSC provisions are misinterpreted, technical committee recommendations are ignored, the consultant's queries are not met and it violates the ministry's instructions. This entire process should be investigated by an independent body," the official noted.
CHEVRON'S VERSION
Sources at Chevron said it had submitted a detailed technical proposal on the project to Petrobangla and GTCL on July 15.
They said there was no legal problem in installing the compressor on GTCL system. Under article 12.4 of the PSC for block 12, a special Joint Management Committee (JMC) comprised of Chevron and Petrobangla members could review proposals for any major development. Under this JMC, Chevron and GTCL can run the compressor station until the cost is recovered and then the compressor can be handed over to GTCL.
Chevron adds that its cost of $52.7 million includes operation and maintenance.
An official said, "Installation of compressors is not within the purview of Chevron's strategic objectives. However, given Muchai's location in Block 12, the company was willing to assist with the Muchai compressor when asked by Petrobangla last year."
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