Business Times

CPC: Petroleum tenders continue to be manipulated

‘Let the games begin’
By Bandula Sirimanna

Despite the glare of media publicity particularly in the Business Times over the irregularities at the Ceylon Petroleum Corporation (CPC), the tender process in the procurement of petroleum products continues to be manipulated at the whims and fancies of some top officials at this crisis-hit state agency.

Several local agents of registered suppliers of petroleum allege that certain CPC top officials are in the practice of directly contacting principal fuel suppliers overseas to inform them about tenders bypassing the local agents. This leads to favoritism and underhand dealings as well as corruption in the oil procurement process in Sri Lanka, they say.

Local agents of registered suppliers of petroleum are concerned as there is a growing tendency to be informed by their principals of a tender only after some CPC officials have approached the overseas principal directly. One local agent said, “There is a clear intent now to get rid of us, so that the games at the CPC can go on unchecked. We carry out a service for our principals both before and after a tender is announced and awarded and this has been going on from the time the CPC started purchases from suppliers abroad”. In tender notices of recent times, it is stated “that only those who have submitted offers (or their local agents) could be present at the tender openings.” In the past, all local agents of registered suppliers were allowed to be at the tender openings, they said, adding that this has prevented manipulation of tenders to a great extent and it had some transparency. But there is no transparency in almost all the recent petroleum deals, he alleged.

Petroleum Industries Minister Susil Premajayantha told the Business Times a Cabinet committee headed by Senior Minister A.H.M. Fowzie has been appointed to inquire into any irregularities in the awarding of tenders to fuel suppliers and to take action accordingly.

He said there was a requirement to award tenders 35 days in advance of a shipment. However, this was not done and his Ministry officials were left in a quandary, Mr. Premajayantha said. He added that the practice of contacting overseas fuel buyers directly should not be resorted to by officials and their duty is to call for international bids under open tender procedures.

There has been wide criticism of the role of the CPC Chairman Harry Jayawardane in the tender process and government inaction. Asked to respond why no action is being taken against the chairman, the Minister said, “No comment.”

Local agents said under Mr Jayawardane’s tenure, tenders were being awarded to some ‘favourite’ companies without sufficient time being given to other registered suppliers to apply for the tender. Citing a recent example they revealed that CPC announced three more tenders on 9th September 2011, for the purchase of (a) 75,000 barrels of Gas Oil and 255,000 barrels of Gasoline, (b) 20,000 metric tons of Low Sulphur Fuel Oil (LSFO) and (c) 300,000 barrels of Gas Oil. All these tenders announced late on this day, a Friday, was to be opened the following Monday, September 12th, but later postponed by a day to Tuesday September 13th giving hardly any time for most of the registered suppliers to open compulsory bid bonds to participate in the said tenders.

It is now reported that only 2 to 3 parties offered at these tenders and two of the tenders (a) and (c) were awarded to Vitol, Singapore which submitted bids for all three contracts. In the case of tender (a) the only party that offered was Vitol. Previously, if only one party offered, the tender was cancelled and a fresh call made. Trade sources are questioning as to why sufficient time was not given, usually a week or more, for these tenders or whether they were lined up for Vitol, specifically. Only the tender (b) was awarded to Petrobras who offered lower than Vitol for the LSFO, they said.

CPC sources said that the tender that closed on September 9 for 6 cargoes of Gasoil, a term contract, each of 40,000 metric tons (or a total of 240,000 metric tons) is to be awarded to the state-owned Philippines National Oil Company (PNOC). At this tender another company M/s Trafigura, Singapore, which has been blacklisted by CPC offered. It is not known whether this was an unsolicited offer or whether they too have been re-instated by CPC with or without a penalty payment, as in the case of Vitol (another company that has been blacklisted), sources said. At another tender that closed on September 2 for 4 cargoes of LSFO, a term contract each for 35,000 metric tons (or a total of 140,000 metric tons), a party named M/s Bominflot, UAE, which claimed to be a subsidiary of Fujeira Petroleum offered its bid. This company claimed to be state-owned but it is alleged that it is a company into bunkering and is a Russian-German venture and is thus not state-owned, as claimed.

They have not opened a bid bond as required in the tender announcement. Even if it is a state-owned company a bid bond is required to be established as in the case of Philippines National Oil Company (PNOC). An oil trader in Singapore told the Business Times that the CPC is having two sets of rules, depending on who the supplier is and this is totally unfair by other registered suppliers.

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