Coral Energy helps CPC to ease fuel shortage importing Russian oil via third party
Sri Lanka has to depend on third party procurement of Russian oil as it cannot import oil directly from Russia under sanctions imposed on that country by the US Energy Minister Kanchana Wijesekera said.
He noted that the ministry has tried its level best to import oil directly from Russia on government to government basis but all attempts were unsuccessful compelling the country to seek other alternatives to tackle fuel shortage.
Attempts to persuade Russia to use a previously agreed upon 300 million US dollar credit line had also failed as it was prohibited from giving credit to a defaulted nation.
This declaration of preemptive default of country’s external debt was madeby Central Bank Governor Nandla Nandalal Weerasinghe on April 12 two months before the scheduled repayment of US$1 billion and the responsibility of this decision was accepted by then Finance Minister Ali Sabry.
Bu the million dollar question at present was that who is going to accept all the after effects of this preemptive default including the difficulty in importing fuel and other essential commodities harming the innocent people of this country, several social service activists asked.
The Russian embassy in Colombo had suggested names of several Russian companies for the state-run Ceylon Petroleum Corporation to deal with but this was not fruitful.
Attempts to persuade Russia to use a previously agreed upon 300 million US dollar credit line had also failed as the country was prohibited from giving credit to a defaulted nation.
However the Russian firms which were technically private, did not take part in tenders or submit unsolicited proposals for single cargoes, but went for long term contracts.
Minister Wijesekera said that the Ceylon Petroleum Corporation(CPC) was compelled to call competitive tenders and only go for unsolicited proposals if the tender failed.
However Sri Lanka has just managed to ease the fuel shortage by importing Russian oil via third party procurement contract, Power and Energy Ministry sources said.
According to Power and Energy top official that neighbouring India is the preferred third party with regard to importing Russian oil as the government has already imported refined oil from India using a credit line.
With a bilateral agreement between the two nations, such a business is very much possible for the selected international company to supply oil for Ceylon Petroleum Corporation (CPC) even under the current dollar crisis, he said, adding that it could be a possible way to import of Russian oil at a reasonable rate.
In the past, CPC has borrowed dollars or used suppliers ‘credit to import oil without making immediate payments
Now suppliers are no longer giving credit to the CPC. As a result, the CPC has to find dollars upfront to pay suppliers when there are forex shortages.
By end April this year US$ 750 Million worth payments were due to its long standing Petroleum suppliers. That money is still remaining unpaid with no signs of any settlement, a top official of the Power and Energy Ministry disclosed.
Under the present set up of the country risk of debt default, no prime bank in the world is confirming the LC’s of Sri Lankan banks anymore, he said adding that these suppliers have decided not to supply fuel to CPC and also started preventing ship owners to carry cargoes to CPC unless/until they were paid.
This has resulted in CPC struggling to buy any petroleum products in the market. Sapugaskanda oil refinery was closed for months due to lack of crude oil and people started waiting for days in queues near fuel filling stations without diesel, petrol and kerosene.
Under this circumstance, CPC has called for expressions of interest from foreign firms in petroleum producing countries to import for the island, as the country stumbles from foreign exchange shortages.
The selected firms should agree to import oil using their own funds without buying dollars in the domestic market for an unspecified period of time.
It has offered a guaranteed fuel quota to any company that can pay in dollars. Potential purchasers must pay as much as a month in advance to open a consumer account at state-run CPC.
All procurement was done upon checking with suppliers. Never a case a supplier quoting higher rate was selected when a lower one was available, top official said.
Over two hundred award letters were given to representatives of foreign firms who quoted low with fancy prices but none of them have supplied fuel up to now, he added.
Under the circumstances the only question before the CPC was whether to buy from the very few suppliers who obviously charge high to mitigate their risks or keep the nation suffering in fuel crisis without any procurement at all.
Bids have been invited for the award of a long term contract for importing crude oil for a period of 7 months from 01.06.2022 to 31.12.2022.
The Cabinet appointed standing procurement Committee has recommended to award the relevant crude oil procurement contract for seven months to Coral Energy a company based in United Arab Emirates and two other companies Vitol Singapore and IOC to bring down crude oil and refined oil shipments till the end of this year, he revealed. .
Cabinet of Ministers approved the proposal presented by the Minister of Power to award this contract in accordance with this recommendation.
The UAE based company Coral Energy has taken great risk of accepting Sri Lankan Rupees to unload its first crude oil shipment with Central Bank promising to convert it to dollars within 30 days.
However Sri Lankan refinery experts first recommended Iranian light for Sapugaskanda refinery then they said only Murban Crude is good.
But now they say Siberian Light is good and Urals is not compatible even after the unloading of the shipment pushing the country in to another wave of petrol, diesel and Kerosene shortage, he claimed.