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Crude oil supply: Tanker begins unloading after 50 days

13 Nov 2022

  • CPC uses new modality
  • Demurrage under discussion
By Asiri Fernando The crude oil tanker which was anchored offshore for nearly 50 days has finally begun to discharge its 99,000 MT cargo ashore under a new procurement modality adopted by the Ceylon Petroleum Corporation (CPC), The Sunday Morning learns. According to the CPC, the tanker carrying Eastern Siberia Pacific Ocean (ESPO) crude oil began to discharge its cargo yesterday afternoon (12) and will likely complete the task tomorrow (14). Last month, The Sunday Morning exclusively reported that the Ministry of Power and Energy and the CPC were exploring the option of a new modality for fuel imports, aimed at navigating around procurement constraints due to the ongoing dollar shortage. Under the new modality, the CPC will utilise some of the storage tanks of Ceylon Petroleum Storage Terminals Limited (CPSTL) as a bonded warehouse to hold inbound fuel consignments ashore, in an effort to avoid incurring massive demurrage costs from tankers awaiting payments to unload. Earlier this month the CPC valued the cost of the shipment to be approximately $ 85 million. The inability to make complete payments for the crude oil shipment and arrears for earlier shipments forced the CPC to shut down the production at the Sapugaskanda Oil Refinery as crude oil could not be imported. When contacted by The Sunday Morning, CPC Chairman Mohamed Uvais Mohamed acknowledged that it had been agreed to unload the shipment that had remained offshore for nearly 50 days to a CPSTL tank farm, which was now being used as a bonded warehouse, offering the State-Owned Enterprise the flexibility to ‘buy’ oil from the storage based on the amount of funds it could secure.  “The cargo is now being unloaded under our new modality and will be completely discharged in three days,” Mohamed said. “The storage tanks can be used as a bonded warehouse to keep the consignment. Then, when we can source $ 15 or $ 20 million, we can pay that amount and get fuel or oil for that value released,” Mohamed explained.  According to him, the supplier that provided the ESPO tanker has agreed to follow the modality and unload the crude oil, which will only be released to the CPC for use based on the payments it makes. The move also ends the incurrence of demurrage from the ESPO tanker, which could reach millions of dollars.  Petroleum sector Trade Unions (TUs) have alleged that each day that a crude oil tanker is delayed from discharging its load past the scheduled payment date, it incurs a cost of approximately $ 150,000 per day.  Going by the TU estimate, the shipment that was waiting for 50 days may have incurred a demurrage of approximately $ 7.5 million. However, both the Ministry of Power and Energy and the CPC dispute this claim, with the Ministry of Power and Energy Secretary M.P.D.U.K. Mapa Pathirana last month stating that the demurrage would have to be negotiated. When The Sunday Morning asked the CPC Chairman about the demurrage for the shipment being unloaded, he stated: “This vessel arrived almost 50 days ago. I don’t think we will have to pay all the demurrage because there was a dispute regarding the contract. It will need to be discussed.” When asked why the CPC could not secure payments for the crude oil shipment, the CPC Chair said that the anticipated arrears owed to the CPC by several State institutions like the Ceylon Electricity Board (CEB) could not be collected. “We have about Rs. 100 billion that is due to us, but unfortunately we couldn’t collect most of it,” he said.   


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