• CPC hasn’t paid Rs. 770 m to supplier: Minister

Controversy surrounds a Rs. 770 million claim dispute between the Ceylon Petroleum Corporation (CPC) and a crude oil supplier regarding nearly 25,700 barrels of the black gold, which were expected to be delivered ashore from tanker vessels, but are yet unaccounted for. 

The CPC and the supplier have traded accusations about how the crude oil went missing, with the CPC seeking the advice of the Attorney General’s office to resolve the matter. 

Minister vs. supplier

According to Minister of Power and Energy Kanchana Wijesekera, the supply agreements for crude oil to Sri Lanka have, over the years, included a supply shortfall of up to 0.3% of the total consignment as a negligible amount; if there is any difference (an additional stock) exceeding the limitation of 0.3%, Sri Lanka has to pay and if there is a shortfall, the supplier has to pay Sri Lanka. 

Nevertheless, it was reported regarding the specific questionable transactions which had occurred in December last year that there had been a shortfall of around 1.8% in one shipment and 1.7% in the other shipment. 

Minister Wijesekera disputes allegations that the CPC has paid the supplier in question Rs. 770 million for the estimated 25,783 barrels of fuel, which authorities claimed were not pumped ashore by the tanker vessel. 

However, petroleum trade unions last week claimed that the CPC had made a payment worth Rs. 700 million for the shortfall of around 25,783 barrels. 

One such trade union last week urged the Government to take immediate legal action against the CPC officials who had approved the payments for the controversial crude oil transaction. 

However, responding to a question posed during a political talk show, Minister Wijesekera denied that the Ministry or the CPC had made a payment. 

On the contrary, Wijesekera said that the CPC had written to the supplier regarding the shortfall in the contracted crude oil supply consignment, seeking a reimbursement of Rs. 770 million for being in breach of the contract’s stipulated 0.3% limit.

Wijesekera told the media that the CPC had in writing informed the supplier and the supplier had responded saying that there was no shortfall from their side, adding that there might be an issue in the CPC’s storage tank’s volume measurement system.

According to him, the CPC also owes the supplier $ 3 million in arrears (approximately Rs. 1.08 billion) and the CPC can pay the supplier the balance once the Rs. 770 million is subtracted from the owed $ 3 million, if the parties consent to such an arrangement.

According to Wijesekera, the CPC has written to the Attorney General seeking advice on the dispute and the AG has instructed the CPC to appoint an independent evaluator to check the CPC’s tanks and the integrity of its measuring system.

Trade unions raise questions

 However, trade union members questioned why CPC officials had failed to identify that the supplier had unloaded a stock which was not in accordance with the agreement. They alleged that the consignment had been unloaded without evaluating the stocks properly. 

Speaking to The Sunday Morning, Energy Trade Union (ETU) Convener Ananda Palitha stressed that Sri Lanka had initially purchased crude from Iran – Iranian Lite – and in those days, the transactions had taken place between Government to Government. However, soon after the embargo on Iran, Sri Lanka approached the open market to purchase crude. 

“We purchased Murban Crude and when purchasing, there were several conditions Sri Lanka was concerned about which were included in the quantity, specification, and delivery date. When the tender is called, these conditions are fixed and then the price is considered. The two parties appoint an independent evaluator too,” he explained. 

Elaborating further, Palitha said that earlier the CPC had used to provide ships to transport crude and later on, due to issues regarding the quality of crude, the conditions had been imposed that the supplier should supply crude and transport the same. The report taken at the loading point is sent to Sri Lanka and based on that, the measurements are also taken here. 

“The loading point report has to come here. The arrival date is mentioned in the report and if they can’t come on that date, then they should pay us demurrage. An independent evaluator, CPC officials, and company representatives check the shipment before unloading and send it to CPC and Ceylon Petroleum Storage Terminals Ltd. (CPSTL) labs to get a report regarding the quality. There is an acceptable shortfall of around 0.3% and the rest has to be compensated by the company,” he stressed. 

“However, the issue in the transaction in question is that the money had been paid for the shortfall too. If the CPC didn’t agree with the output, it clearly mentions the arbitration. There is a difference of 25,861 barrels and there is demurrage for the shipments that were delayed for 28 and 42 days,” Palitha alleged. 

Urging the Government to take immediate legal action against the officials whom the trade union claims are involved with the allegedly corrupt transaction, he urged the CPC to reveal who had ordered the payment. Palitha also questioned why Sri Lanka remained keen to file spot tenders for fuel.