Enter Swiss firm as CPC’s overpriced oil deal backfiresBy Bandula SirimanneView(s):
A Swiss-based company has emerged to negotiate a disputed payment deal the UAE-based Fujairah Petroleum Company had signed with the Ceylon Petroleum Corporation (CPC) to supply up to 160,000 tons of low sulphur oil.
Last week the Sunday Times reported that the government agency stands to lose at least Rs. 1 billion from the deal which industry sources allege is irregular and violated tender norms.
The first cargo of 35,000 to 40,000 tons of low sulphur oil was sold to the CPC at Singapore Platts +$108 per ton by Fujairah and the cargo was discharged.However, a dispute arose over the price of both the first and a new, second cargo of the same quality. A two-member team led by Manisha Heerasing from the Swiss-based MOCOH, an international commodities trader, arrived in Colombo this week and is negotiating with CPC authorities for a fresh new price for the cargoes.
“Who is MOCOH and is it a front company for the actual shipper who is behind the Fujairah Petroleum deal? Shouldn’t the CPC deal with Fujairah Petroleum direct and not with some intermediary,” one source asked, adding that Fujairah Petroleum was a company that was blacklisted once but reinstated by former CPC chairman Harry Jayawardena.
Earlier Fujairah Petroleum and the CPC had agreed on a price of Platts+$54 per ton for four cargoes of upto 40,000 each, and cabinet approval was sought and given at this purchase price. Subsequently the CPC amended the agreement saying the actual price should be Platts +$54 +$54 (total of $108) and not Platts +$54, and opened a Letter of Credit (LC) on the basis of the new price.
However, the deal fell apart after the trade raised a hornet’s nest following the Sunday Times exposure of the irregular deal and the new price sans cabinet approval, forcing the CPC to revert to the old Platts+$54 price.
Now MOCOH – appearing on behalf of Fujairah Petroleum – is negotiating for a price of Platts+$89 for all four cargoes – as a compromise.
CPC’s newly appointed Managing Director L.E. Susantha Silva, in a statement this week, said there was a trade dispute on the first shipment to the value of Rs. 278 million and this had now been resolved and action taken to recover the money from the supplier. He said there was no price difference in the second shipment which was being unloaded. He also said the CPC incurred no loss.
Mr. Silva didn’t comment on whether Fujairah has refunded the full difference between the price approved by the Cabinet and the higher price at which the LC was opened on an amended agreement.
The second shipment was being discharged but it was stopped halfway due to the payment issue. The ship is in port.
Trade sources said irregular tenders were a regular occurrence at the CPC but little or no action was taken against the culprits.
They said the extra $54 per ton was probably going into the pockets of corrupt officials through an overseas intermediary linked to the shipper.