Minimising costs: PSO saves $5m in base oil purchase

Buys oil directly from manufacturer instead of middlemen.

ISLAMABAD:

Pakistan State Oil (PSO) has claimed that it has saved around $5 million by purchasing base oil directly from the manufacturers and eliminating the role of middlemen and commission agents.

Earlier, a tender was floated to buy base oil through middlemen but was scrapped due to allegations of kickbacks in the process.

“Now we have procured the product directly from manufacturer Exxon under the PPRA (Public Procurement Regulatory Authority) Rule No 42, saving an astounding amount of $5 million,” a PSO official said.

PSO has been buying additives from additive suppliers for manufacturing of lubricants on spot basis through tenders. In September 2011, a tender for base oil was floated and the additive supplier (Lubrizol) recommended Group-II base oil of Exxon (Jurong) and Formosa.

The authorised agent of Formosa was awarded the tender but it failed to deliver as per terms of the tender and the contract was vitiated. The PSO management deliberated before procuring the base oil again and took into account various factors.

“Additive suppliers whose additive PSO has in stock recommended Group-II base oil manufactured by Exxon (Jurong) as the oil of choice to use with their additives for getting API certifications and approvals,” the official said.

“Under PPRA rules, open tender is only one of the various procurement methods which a company can adopt. As per Rule 42 of PPRA, a procuring agency may utilise direct contracting method whereby the agency has to acquire material having different technical specifications,” the official said.

PSO contracted for base oil at a price which was lower by almost $950 per ton than the bids received in the tender.

Published in The Express Tribune, May 25^th, 2012.