Crude oil shipment: Non-payment increases demurrage charges

By Asiri Fernando


A vessel carrying 99,500 MT of crude oil on order for the Ceylon Petroleum Corporation (CPC) has remained outside Sri Lanka’s territorial waters since 23 August due to delays in payments, The Sunday Morning learns.

The crude oil tanker had arrived off Sri Lanka on 23 August as scheduled, but could not discharge its consignment due to the CPC being unable to make payments for the shipment, according to CPC sources.

The vessel, which is employed by UAE-based supplier Coral Energy DMCC, carries a shipment valued at approximately $ 85 million. The vessel will not enter Sri Lankan territorial waters unless a complete payment is made.

CPC’s Jathika Sevaka Sangamaya (JSS) trade union Leader Ananda Palitha told The Sunday Morning that the tanker had incurred millions of dollars in demurrage charges.

“This vessel has been waiting to release its cargo of crude oil for nearly two weeks now. Each day that the vessel is not unloaded incurs approximately $ 120,000 in demurrage. The public has to foot an additional bill of nearly $ 2 million as of today (9),” Palitha charged.

However, Ministry of Power and Energy Secretary M.P.D.U.K. Mapa Pathirana said that a part payment had already been made following discussions with the supplier and added that he was confident that the shipment could be discharged into CPC storage soon after payment was finalised this week.

Pathirana acknowledged that the CPC had been short on funds to make the full payment during the last two weeks, but would not comment on the demurrage charges piling up.

It is understood that the crude oil shipment from Coral Energy requires a 110% advance payment to be made prior to the consignment being discharged. The terms of the agreement with Coral Energy allow the State to make payments to a Non-Resident Rupee Account (NRRA) of the supplier in rupees. Once a deposit of 110% is made in rupees, the funds are to be converted to dollars after 30 days. 

The Government has pursued such payment terms to allow it to secure adequate dollar funds to make payments.