• Delivery window revised post-award amid global disruptions
• Subsequent crude shipments secured at lower prices as markets ease

Addressing reports of estimated demurrage losses linked to the crude oil tender revision involving Itochu Petroleum Co. (Singapore) Ltd., the Ceylon Petroleum Corporation (CPC) states that any such losses cannot be calculated at this stage.

In March, a spot tender closed for the procurement of three crude oil grades – Midland (WTI), Saharan Blend, and Miri Light.

A single bidder, Itochu Corporation Singapore, submitted an offer, quoting West Texas Intermediate (WTI) crude at a premium of $ 37.99 per barrel, along with a demurrage rate of $ 350,000 per day.

Controversy has since arisen over the demurrage rate, with claims that it is significantly higher than prevailing market rates for similar shipments during the same period. 

For instance, comparable contracts for Murban crude typically carried demurrage rates between $ 100,000 and $ 150,000 per day.

Several reports have been circulated that the CPC could incur losses of up to $ 750,000 due to these demurrage charges.

When contacted by The Sunday Morning, CPC Managing Director Dr. Mayura Neththikumarage dismissed these reports.

“The ship has not even arrived yet. Nothing has occurred to determine such a loss. Even without the ship arriving, without us making any payment, how can we incur demurrage?” he questioned.

He explained that the agreement with Itochu Corporation followed the standard tender process, under which the bidder that complies with the tender conditions and offers the lowest evaluated rates is typically awarded the contract.

Demurrage charges, he noted, only arose if a vessel were to arrive at port and exceed the agreed laytime, usually due to delays in unloading cargo. Therefore, without the vessel’s arrival, any estimation of demurrage-related losses would be premature.

Commenting further, Neththikumarage said: “We agreed to that rate at the time because it was during a war and that was the prevailing market rate. If you look at our operational history, we have not had to pay demurrage. That is a cost incurred only if unloading is delayed beyond the agreed time. Over the past year, we have not experienced such a situation.”

In mid-April, Itochu requested a revision of the delivery window, shifting it from 22–26 May to 28 May–1 June. Under spot tender rules, such post-award changes are generally not permitted and would typically require re-tendering. However, the CPC approved the revised delivery schedule.

Neththikumarage claimed that the agreement had been reached during a period when the Iran-Israel conflict was disrupting global trade and driving up prices.

“At that time, the premium per barrel had increased to around $ 50, sometimes even higher. This was not unique to Sri Lanka but applied across the global market,” he argued.

He added that given the limited availability of suppliers during the conflict, the WTI offer by Itochu was considered competitive. “When prices are high, indices are high and you have to pay more. When indices are low, you pay less,” he said.

Neththikumarage noted that subsequent shipments had been secured at lower prices as market conditions stabilised. “In April, we received two crude oil shipments at lower prices, and additional shipments expected next month are also at reduced rates. The only factor is that WTI shipments originate from the United States, with a shipping time of around 45–55 days, as they were loaded in the previous month,” he said.