Ceypetco suspends millions worth oil contracts

State-owned Ceylon Petroleum Corporation (Ceypetco) has suspended oil contracts worth millions of dollars signed last year for fuel deliveries, the CPC Chairman told Reuters today.

“We have suspended some previous contracts ... due to (Ceypetco) not following standard competitive guidelines and standards,” said Ranjith Wickremesingha, Chairman of Ceypetco.

 Under some of the contracts, companies have been able to supply more than the maximum volumes allowed, up to as much as twice the amount originally stipulated, Wickremesingha said.

 “These are violations,” he said.

 Ceypetco agreed to several term contracts last year for gasoil, gasoline and jet fuel deliveries from PetroChina , Emirates National Oil Company (ENOC), Sinopec Corp's trading arm Unipec, and Swiss Singapore, part of the Indian multinational conglomerate Aditya Birla Group.

 The companies could not be immediately reached for official comment on the suspensions.

 Some of the contracts had been informally extended longer than allowed past their delivery periods without being officially renewed with signed contracts, another source with Ceypetco said.

 Ceypetco has already issued new term tenders seeking nearly 8.6 million barrels of oil products for deliveries from September 2015 to April 2016, that will partly replace volumes from the suspended contracts.

 “The sellers could always participate in the new term tender and sign proper contracts,” the Ceypetco source said.

 With last year's contracts negotiated when oil prices were about 40 percent higher, some of the sellers are pushing back.

 “I don't think it will be easy for Ceypetco to get out of these contracts,” a source at one of the term sellers said.

 Ceypetco's Wickremesingha said his lawyers have told him that the company will not have to pay any penalties. (Reuters)