PSO-supplied fuel causes problems, raises questions

ISLAMABAD:

Pakistan State Oil (PSO), the country’s state-owned oil company, is actively involved in the import of inferior quality residual furnace oil (RFO) and low sulphur furnace oil (LSFO), oil which frequently chokes the pipeline which supplies fuel to HUBCO and damages chillers of both private power companies and state-run thermal power plants.

But this is a charge that the PSO strongly denies. A PSO spokesperson, when contacted, denied the allegation and claimed that PSO “never provided low-quality fuel to thermal plants.”

However investigations reveal that import of inferior petroleum products goes back to the 90s when the National Accountability Bureau (NAB) probed many cases of low quality oil which landed many petroleum ministry and PSO officials in jail. Sadly, the foreign supplier from a friendly Muslim country managed to stop investigations into the import of such oil to protect the network involved.

NAB’s retreat resulted in covering up an embezzlement of billions of dollars, besides encouraging officials to continue to make money through this scam. The network comprising senior PSO officials always manages to avoid punitive action. Interestingly, the number of reported cases surged between 2009 and 2011. Furnace oil import costs the national exchequer roughly $5 billion annually. Inferior quality oil import costs the national exchequer over $ 1 billion annually, sources said.

The correspondence of HUBCO and KAPCO on supply of inferior quality RFO and LSFO indicates that both companies raised the issue with PSO and rejected several shipments between 2009 and 2010. These bulk buyers repeatedly told PSO to stop supplying them inferior quality fuels but PSO did not oblige.

HUBCO warned PSO to stop supplying it inferior quality RFO in a series of letters. Messages from Mustafa Gilani (senior business manager from HUBCO) addressed to Zulfiqar Jaffery (general manager consumer business) stated: “Despite your assurances, PSO failed to supply the approved quality of fuel in the right quantity.” Mustafa Gilani’s letters indicate that other than supplying low quality furnace oil, the quantities supplied were also lower than what was agreed.

Similarly, KAPCO’s letter of July 12, 2010 signed by Khalid Pervez Bajwa, (general manager engineering KAPCO) addressed to Jaffery said: “We would like to raise our concern over sulpher content in LSFO (as high as 2.7 percent) ….against the specified rate of 1 per cent.”

The letter further said KAPCO could not accept deliveries of fuel oil that do not meet the specification in part-A of schedule 1 of the oil supply agreement.

Asia Petroleum Limited (APL), a subsidiary of the PSO in a letter of July 7, 2009, holds its parent company responsible for supply of extremely low-quality furnace oil. The letter stated that RFO provided to HUBCO could not be pumped because it choked the pipeline.

PSO accepted a shipment of 65,000 tons rejected by HUBCO for its low quality in 2010.

An inquiry report, a copy made available to the Express Investigative Cell (EIC), indicates that out of 65,000 tons rejected from the LSFO shipment, 2,282 metric tons was stolen from the Lalpir depot in 2010. At the time, PSO charge-sheeted a few junior employees for stealing the fuel.

Many in PSO believe that this was a deliberate attempt to protect seniors who accepted the rejected shipment of LSFO.

PSO officials allegedly collude with the supplier. It is further alleged that from surveyor to seniors, everybody in PSO has a fixed share in the kickbacks for accepting low-quality oil imports, sources said.

However a PSO spokesperson in a written statement sent to EIC said HUBCO never rejected any fuel consignment from PSO and the supply chain is in line with international quality control standards that includes monitoring and verification of fuel at each stage of the supply process, according to a company statement.

Published in The Express Tribune, February 20^th, 2012.