Supplier of contaminated crude has not paid for damaging Indeni – AG

Indeni Petroleum Refinery Limited needs K24,599,542 to repair damages suffered as a result of processing contaminated crude oil.

According to the latest report of the Auditor General on parastatals, Gunvor SA, the company which supplied the oil had agreed to foot the bill but had only paid K5,444,482 as of May 2017.

“In a letter dated 28th December 2015, the Managing Director at Indeni Petroleum Refinery Company Limited informed the Permanent Secretary at the Ministry of Energy and Water Development that a technical inspection had been done by a team from Gunvor SA and it was established that the expenditure incurred with regard to corrosion and the anticipated costs were as follows: actual costs as at December 22, 2015 – US$1,971,835.30, Forecasts up to June 2016 – US$851,950.12 bringing the total to US$2,823,785.42,” read the report.

“A review of the minutes of the directors meeting reviewed that Gunvor SA indicated that they were willing to pay for the damages due to corrosion and anticipated costs totalling K24,599,542. As of May 2017, a total amount of K5,444,482 had been paid by Gunvor SA leaving a balance of K19,155,060 not paid.”

The Auditor General revealed that as of March 2017, Indeni still had in store 22,675 metric tonnes of crude oil which was contaminated with organic chlorides.

The Auditor General stated that rising maintenance costs resulted in a reduction in Indeni’s profit margin by 74 per cent.

“In 2014, the company recporded a growth in profit of 1,881 per cent from K2,011,000 in 2013 to K37,834,000 in the year 2014. The profit also increased from K37,834,000 in the year 2014 to K78,026,000 in 2015 representing a percentage increase of 206 per cent. The profit however decreased from K78, 026,000 in 2015 to K21,121,000 in 2016 representing a reduction of 74 per cent which was attributed to a reduction in the number of stream days (production days) arising from delays in the arrival of crude oil cargo and rising maintenance costs,” read the report.

Meanwhile, the Auditor General revealed that Indeni wasted K674,898 on consultancy services on the review of organisational structure as they did not implement any of the consultant’s findings.

“In February 2014, Indeni Refinery Limited engaged Mint Advisory Services Limited to provide consultancy services for the organisational review of the company at a contract price of K674,898 for a duration of three months from 3rd March to 23rd May, 2014 or any other period as may be subsequently agreed by the parties in writing. The consultant presented their report to management in March 2015. However, management rejected the consultant’s findings and did not implement any of their recommendations claiming they did not understand the intricacies of the refining business rendering the expenditure wasteful,” read the report.

         

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