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Fuel imports: Govt. seeks alternatives to avoid demurrage

16 Oct 2022

  • Crude oil shipment offshore for 21 days
By Asiri Fernando The Ministry of Power and Energy is exploring the possibility of utilising some of the storage tanks of the 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, Minister of Power and Energy Kanchana Wijesekera said. Minister Wijesekera told The Sunday Morning that the plan had already received the green light from the Standing Cabinet Appointed Procurement Committee (SCAPCS), with consultations ongoing with other stakeholders and line ministries to streamline the plan prior to submitting it for Cabinet approval within the next few weeks. According to Wijesekera, the move is designed to enable petroleum suppliers to unload their consignments to shore-based storage facilities without facing delays relating to payment issues, thereby removing the Government’s burden of demurrage payments. “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 for that value released. During the difficult time we passed earlier this year, we did something that I doubt has been done anywhere else. If we only had $ 15 million in hand to pay for a $ 40 million shipment of fuel, we paid the $ 15 million and got the vessel to unload that value of fuel,” he said. “Two suppliers we have spoken to are keen on the idea. The storage tanks can act like a bonded warehouse to hold the fuel consignment. Then, as the Ceylon Petroleum Corporation (CPC) gets dollars released, we can make the payment and get fuel for that value released from the tanks,” Wijesekera explained. The proposed method is being explored following massive demurrage fees, which are also paid in dollars, over the last year. The plan will also allow the tankers to return to their planned schedules, without having to remain off the west coast of Sri Lanka for full payment.   BOX 1 Ships at sea A crude oil shipment carrying nearly 99,000 MT of Eastern Siberia-Pacific Ocean (ESPO) crude oil imported from Russia has been lying offshore awaiting payments to discharge its cargo, Minister of Power and Energy Kanchana Wijesekera revealed yesterday (15). He acknowledged that Sri Lanka had not completed payments for the two previous shipments of crude oil, resulting in the refinery having to be shut down due to the lack of oil to refine. Wijesekera said that a petrol shipment (92 octane – 35,000 MT), which had arrived last week, had begun discharging its cargo last morning (15) after receiving payments from the CPC on Tuesday (11).  He stated that due to the complications of the current banking system, the payment had only been acknowledged by the supplier’s bank on Friday (14) evening. Another diesel shipment (35,000 MT) from the supplier Swiss Singapore Overseas Enterprises (Pte) Ltd. remains offshore, awaiting full payment. Wijesekera said that the CPC on Friday (14) had paid $ 15 million as a part payment. “We need to pay about another $ 30 million to get the consignment released. We hope to finalise that on Monday (17) or Tuesday (18). We are discussing with the supplier if we can unload $ 15 million worth of fuel over the weekend,” the Minister said, adding that with payments delayed to the tune of nearly $ 750 million, many suppliers were reluctant to release cargos without full payment.   Box 2 Spot tenders: No bidders Term tenders and spot tenders issued by the CPC from January to August this year have failed to attract any bidders, Minister of Power and Energy Kanchana Wijesekera said yesterday (15) in response to criticism about tender irregularities in fuel purchases. According to Wijesekera, from 1 January until last week, the CPC had evaluated 301 unsolicited proposals to supply fuel and awarded orders to 60. However, only 11 of the 60 have been able to import the fuel as per the orders given.  According to the Minister, between 1 January and 14 August, 67 spot tenders for petroleum products had been issued by the Ministry and eight term tenders had also been issued. None had received any bidders.  Wijesekera argued that because there were no bidders for the spot and term tender issued for Murban, El Sharara, and other crude oil variants, the Government had imported what was available through the suppliers – Ural and Siberian Light crude oils. “No one came forward, so in August we decided to open the scope to several other varieties of crude oil, following consultation with petrochemical experts at the refinery,” the Minister said.   


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