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The News

Published Date: Jan 10, 2013

5 billion USD PSO furnace oil deal scrapped by NAB

ISLAMABAD: The ‘scandalous agreement’ of $5
billion between PSO and Bakri Trading Company, Pakistan (Pvt) Ltd (BTCPL)
stands abolished, a senor official of the National Accountability Bureau on
condition of anonymity told The News.

The National Accountability Bureau (NAB) swung into action by
taking notice of the much-touted but questionable $5 billion furnace oil
purchase agreement accord between PSO with the Bakri Trading Company, Pakistan
(Pvt) Ltd (BTCPL).

The scandalous deal came into light when the PSO awarded the
contract to the BTCPL without open tendering in violation of the Public
Procurement Regulatory Authority (PPRA) rules.

“The oil supply is the life line to Pakistan’s economy. The award
of oil supply contract to a small trading company without competitive bidding
has posed a serious security and strategic risk for the whole economy of
Pakistan.”

Under the agreement, the PSO was to purchase 1.4 million tonnes of
furnace oil annually. The agreement between PSO and Bakri Company limited was
to last for five years. After the lapse of five years period, in case both
parties are in agreement, the accord was to be extended further.

He said the NAB had asked PSO to submit the agreement document
with the Bakri Company Limited. “The agreement document was analyzed and
examined carefully to asses as to whether the agreement is faulty or not.”

The Managing Director of PSO, Naeem Yahya Mir, who submitted the
statement to the NAB some two-three weeks back, took a U-turn, saying that such
an agreement had neither been finalised nor executed, rather it was prematurely
leaked to media by some of the board members, the top NAB official insisted.

He said that it was also stated by the PSO in the office of NAB,
while making presentation on aforesaid agreement, that so far there was no
question of financial embezzlement.

It is also pertinent to note that the PSO management in the
presentation also denied the deal with the oil trading company and highlighted
that no such agreement had so far been made with any company.

However, well-placed official sources in the Ministry of Petroleum
and Natural Resources told The News that Adviser to the PM on Natural Resources
and his Secretary Dr Waqar Masud, in a clandestine correspondence to PSO, asked
to review the deal with the Bakri trading company.

The PSO has now advertised in The News on January 09, 2013, the
tender to import the same quantity of 1.4 million metric tons of ‘Locally
blended High Sulfur Fuel Oil for three to five years according to codified
procedure. The tender available at
http://e.thenews.com.pk/1-9-2013/pic.asp?picname=03_04.gif.

It is pertinent to mention that the agreement was to purchase 1.4
million metric tons of furnace oil from Bakri Trading Company, Pakistan (Pvt)
Ltd. (BTCPL), which is no more on the ground. The PSO’s top management had
assured the NAB that it would advertise the tender afresh to make the deal
transparent. So PSO, in a face-saving attempt, has advertised the tender to
import the Locally Blended High Sulfur Fuel Oil for three to five years,
seeking request for proposal from reputed and well-established companies and
refineries.

However, when contacted, the MD PSO insisted that the deal with
the Bakri Company is very much there, and the ad that appeared in the newspaper
has nothing to do with the deal of PSO with the Bakri Company. “We at PSO have
the resolve to substitute the imports with local products and keeping in view
the same vision, the ad has been published to seek proposal from local
producers/blenders to substitute remaining volume of import with local blended
stuff,” says the MD.

However, the top official said that PSO is basically attempting to
save its face as it fears the Bakri may drag the PSO into litigation.

Earlier, Arhsad H Abbasi, adviser on energy at the Sustainable
Development Policy Institute (SDPI), in a letter to the NAB chairman had
pointed out the ‘illegal deal’ between PSO and the oil company.

Transparency International (TI) has already written a letter to
the prime minister on November 10, 2012, regarding the ‘unlawful agreement’ and
requested to cancel the contract to save the national exchequer.

The allegations levelled have been reconfirmed by Securities and
Exchange Commission of Pakistan and Public Procurement Regulatory Authority
against the unsolicited contract awarded to the Bakri Oil Trading Company (Pvt)
Ltd.

The letter written by the SDPI adviser says: “PPRA rules have been
violated so openly and blatantly, infringing the Public Procurement Regulatory
Authority Ordinance, 2002 (XXII of 2002) and ignoring vital clauses 12,
13,15,16, 21,26, 28, 30 and 35 of Public Procurement Rules 2004. It further
says: the PSO has failed to abide by mandatory clauses of ‘methods of
advertisement’, ‘Pre-qualification of suppliers and contractors,
Pre-qualification process, ‘Open competitive bidding’, ‘Bidding documents’,
‘Opening of bids’,‘Evaluation of bids’, and ‘Announcement of evaluation
reports’.

Mr Abbassi says there is no need to award the contract to a
private company when the PSO itself has oil blending facility and requisite
permission from the government. He said no approval was taken from the PSO
board before awarding the contract.

He further said the award of oil supply contract to a small
trading company without bidding can pose a serious security and strategic risk.

The most alarming aspect of the scandalous agreement is that the
Bakri Company will not be liable to continue to provide the supply of furnace
oil in case of war or internal strife.

The legal proceedings will only be initiated in Karachi if there
exists any dispute, unveils another objectionable clause of the agreement.

Under the agreement, PSO and Bakri Company would jointly examine
the quality and quality of the furnace oil. This shows both parties do not
believe in transparency as there should have been a third party, which could
monitor the quality of the furnace oil. This means that the said clause is
prone to breed corruption. In case PSO refuses to buy the furnace oil from the
Bakri Company, then PSO will have to pay not only the cost of oil but also the
damages.

According to the official at the Ministry of Petroleum and Natural
Resources, the accord is not only faulty but damaging too for the country. It
may not be out of place to mention that the Board of Management (BOM) of PSO
has taken a very strong notice of the faulty and damaging agreement with Bakri
company limited.