Furnace oil crisis: CPC may blacklist supplier

By Malik Gunatilleke

After five privately-owned power plants were closed last week due to contaminated furnace oil, the Ceylon Petroleum Corporation (CPC) is investigating possible tampering and is considering blacklisting a Singapore-based supplier.

Around 20,000 tons of furnace oil was said to be contaminated by an excessive amount of waste lubricating oil which may have been dumped into the furnace oil during the shipping process. Five privately-owned power plants generating a total of 275Mw of power were shutdown as a result of the poor quality furnace oil.

CPC Planning and Development Manager Ranjith Wickremasinghe said the corporation was testing the contaminated oil to determine the exact problem that resulted in some private power plants reporting machinery malfunctions.

“According to the specifications we had, there is no visible problem. However, testing done by some of the private parties has shown some contamination,” he said.

The CPC imports ready-to-use furnace oil which is stored and later sent directly to power suppliers. According to Mr. Wickremasinghe, financial constraints have not enabled the CPC to raise the standards of specifications when importing furnace oil.

“We have already lost about Rs. 12 billion as a result of subsidizing furnace oil for private power suppliers. If we are to raise the standards of furnace oil, the cost will obviously also increase,” he said.
He said that since power generation was a vital factor for economic growth, the CPC would take effective remedial action including the blacklisting of suppliers.

The CPC was also not ruling out the possibility of some tampering during the shipment, Mr. Wickremasinghe said. The CPC is also not liable to compensate the private companies affected by the stock as the furnace oil provided was acceptable according to the specifications agreed upon by the buyer and the CPC. Measures are to be taken to address the problems shown by additional testing in the list of specifications when importing furnace oil in the future.

In a related development, other CPC sources said the corporation would soon assume responsibility for the import of furnace oil. This had been transferred to the Treasury following the hedging controversy last year. The sources said the CPC was in the best position to handle the import of fuel and the Treasury would transfer the responsibility soon.

Among the five privately owned power plants affected by the complication was ACE Power Embilipitiya Pvt Ltd which halted its operations when the situation regarding possible contamination came to light. An ACE Power official said the furnace oil supplied by the CPC was unusable according to the internationally recognised specifications.

While ACE had purchased 4 to 5 million litres of the contaminated furnace oil he said that even though there were no immediate problems with the machinery the damages might surface in a few weeks’ time.

Sudath Annasiwatta, Senior Manger Project Coordination at Lakdhanavi Ltd said that there was a definite problem with the oil and it was fortunately detected before any damage was done to the machinery.

“Our plant in Puttalam was shutdown for three days when we noticed a problem with the leak fuel oil. We immediately stopped the machines and they were cleaned,” he said.Mr. Annasiwatta said the oil was certainly contaminated as additional testing proved and that the plant was now operational as it was receiving furnace oil from Sapugaskanda.

The Finance head at Hemas Power which operates the 100Mw Heladhanavi plant in Puttalam said they shut down operations for two days as a precautionary measure once they had been informed of the malfunctioning machinery in some other plants.

He said that according to the quality check and the specifications of purchase there was nothing wrong with the furnace oil but due to the doubt they had with the product they had shutdown operations.

“We are not getting the furnace oil from the Kolonnawa terminal but we are operating on the oil supplied form Sapugaskanda,” he said.

CPC trade union officials said samples of the oil had been sent to Singapore for testing because no contaminations could be detected through the primary tests.

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