Controversy surrounds an alleged attempt by the Power and Energy Ministry to release payment to a Dubai-based third-party company that had supplied crude oil to the Ceylon Petroleum Corporation (CPC) without any written agreement between the two parties.
It is revealed that the CPC had initially entered into an agreement with Dubai-based Coral Energy to supply crude oil on a long-term contract basis for a four-month period. However, later on, due to certain situations not known to Sri Lanka, a third-party company named Prontus Trading DMCC, which is also situated in Dubai, had supplied the said crude oil requirement instead of the initial supplier Coral Energy – to which Sri Lanka had awarded the long-term tender.
The Sunday Morning learns that this had created turmoil within the CPC, as the corporation had refused to make payments for the said shipments received by Sri Lanka from a third-party company instead of the initial supplier with which agreements had been signed.
It is in such a backdrop that Power and Energy Minister Kanchana Wijesekera, in a recent Cabinet memo – No.MOPE/SEC/COM/2023 dated 3 April 2023 – had requested Cabinet approval to release the said payments to the third-party company.
Contract timeline
On 19 December 2022, the Cabinet approved the awarding of a four-month contract from 1 January 2023 to 30 April 2023 to M/s Coral Energy DMCC to supply 2.1 million +1-5% barrels of Murban-Siberian Light crude oil in three shipments of 700,000 each on a storage modality mechanism. Accordingly, the first shipment had reached the country on 25 March 2023, deviating from its original schedule of 6-7 March 2023.
Prior to the said shipment reaching Sri Lanka, Minister Wijesekera in his Cabinet memo had stated that Coral Energy had in a letter requested the CPC on 21 March to transfer the contract agreement between it and the CPC to the Dubai-based third-party company named Prontus Trading DMCC.
As the Minister had stated, the issue had been discussed during a storage review committee meeting held on 23 March. However, it had been revealed during the meeting that the available crude oil at the time was only enough to continue operations of the refinery till 27 March.
It had also been noted that should there be a delay in supplying crude, it would affect the supply of naphtha and fuel oil to the Ceylon Electricity Board (CEB) and that there was no other solution to get another shipment of crude during a short period of time, while also affecting the buffer stocks maintained by the CPC. Accordingly, the committee had recommended unloading the stocks in the crude oil shipment owned by Prontus.
The matter had also been referred to the Board of Directors of the CPC during an emergency meeting and the board too had been of the opinion that a continuous supply should be assured to the refinery to continue its operations without any hindrance.
The board had also agreed to proceed with the request made by Coral Energy to transfer the agreement to a third-party company. Meanwhile, it had handed over the powers vested with it to a committee appointed by the Cabinet to make any necessary payments to the company while releasing itself from responsibility in that regard.
AG’s opinion
The opinion of the Attorney General (AG) too had been sought by the CPC and the AG’s response had been received on 31 March.
The AG had however stated that such a transfer could not be approved.
Despite this advice, the unloading of the stocks imported to Sri Lanka by Prontus Trading had commenced on 26 March while disregarding Clause 10 of the said ex-storage modality agreement and the unloading had been completed by 28 March.
The AG had accepted that the CPC had agreed to transfer the agreement between the CPC and Coral Energy to Prontus Trading and the CPC had also utilised a total of 35,000 MT of crude oil from said shipment. Therefore, the AG had opined that it was suitable to obtain the necessary approvals from a Cabinet appointed committee, as all such approvals were obtained from Cabinet appointed committees.
The AG had further advised to enter into a tripartite agreement with Prontus based on the recommendations in the previous agreement with Coral Energy, subject to the approval of a Cabinet appointed committee.
Furthermore, the AG had stated that the sole responsibility of such a transfer to a third-party company should be undertaken by the CPC. The AG had also observed that the release of such stocks had been conducted in a manner that had not been mentioned in the agreement signed between Coral Energy and the CPC.
Meanwhile, Minister Wijesekera had also informed the Cabinet that due diligence had been done on Prontus, with it being confirmed by the Consulate General’s office in Dubai.
The second such consignment was also expected by the country in April, the Cabinet memo notes.
In such a backdrop, The Sunday Morning reliably learns that the ministry had been attempting to release necessary funds while ignoring CPC opposition to the third-party company, with which the CPC had no agreement whatsoever.
Meanwhile, a senior official attached to the Accounts Division of the CPC, who wished to remain anonymous, told The Sunday Morning that despite the granting of Cabinet approval, the CPC had not transferred nor made any payment to a company that it had not signed an agreement with. “We can’t make any payment by deviating from the given guidelines,” the senior official said.
However, when The Sunday Morning contacted the highest authority below the political representation of the Ministry of Power and Energy, he said that he did not remember any information regarding such an incident, noting that all correspondence with the media was conducted by Minister Wijesekera, therefore saying that he did not wish to divulge any information.
Attempts to contact Power and Energy MInister Kanchana Wijesekera and CPC officials including its Chairman were futile.