Gunvor sues govt over “contaminated” oil

Oil trader Gunvor has sued the Zambian government for refusing to take the crude oil supply, which has been abandoned at sea in Dar-es-Salaam for over a year and half.

And Ministry of Energy permanent Secretary Brigadier General Emeldah Chola, in the audio published on diggers.news, says the Zambian government cannot commit to paying Gunvor for the “contaminated oil” until the matter is settled in the arbitration court.

News Diggers! has visited a crude oil tanker MV Alberta, that has been abandoned at sea in Dar-es-salaam since January 2016, carrying about 100,000 metric tonnes of crude oil destined for Zambia.

A source found at the offshore location explained to this reporter in an interview that the oil tanker was accumulating about US$20,000 per day in demurrage (a charge payable to the owner of a chartered ship on failure to load or offload within the agreed time).

“This ship docked in January 2016 but the [Zambian] government refused to take the crude saying it was contaminated. Now what usually happens is that once there is such a dispute, an independent expert is called in to conduct lab tests and verify if the claim is true or not. Meanwhile, the ship does not stay even longer than two months because keeping this here costs US$20,000 per day in demurrage,” explained the source.

“In this case, MV Alberta has accumulated over US$10 million, and I can assure you that the owners of this ship want that money which Gunvor will not pay because they have actually sued the [Zambian] government.”
The source narrated that Gunvor refused to take back the oil, insisting that it was according to the specifications requested by the Ministry of Energy.

“Gunvor has stuck to their guns, they have refused to take back the crude. They argue that the vessel contains the exact specifications which the Zambian government ordered. So they have resolved to sue the government. The last time we heard on that issue, the government surrendered the matter to the Attorney General for recommendation. But the dispute may cost government millions of dollars,” said the source.

When contacted for a comment, Energy Permanent Secretary Chola said government was not willing to pay for the “contaminated” crude.

“It’s contaminated crude, who has said we are going to pay? That case is still with the arbitration court, so the ruling hasn’t yet come out,” said Chola adding that the matter was not being heard in the Zambian courts.
“The details will come out once everything has been concluded. Currently the ones who are handling it are Ministry of Justice.”

An investigation has revealed that the Zambian government deliberately purchased the “contaminated” crude feedstock from Gunvor, despite having been warned of the damage which the previous consignment from the same supplier did to Indeni Petroleum Refinery.

In May 2014, Indeni wrote to TAZAMA, explaining that a products sampling and analyses report had shown that the imported feedstock by Gunvor contained Organic Chlorides, which caused corrosion attacks on the refinery.
“Once again we present and demonstrate through product sampling and laboratory analyses by Intertek Testing Services that imported crude feedstock (Refinery raw material) continues to contain causes of refinery corrosion attacks namely Organic Chlorides,” the letter signed by then Indeni Managing director Maybin Noole read in part.

“Shipment cargo MT Lovina that docked recently with samples taken from board/ship’s tanks before offloading had 7.0 wt ppm of Organic Chlorides, thus depositing into Dar Tazama tanks Organic Chlorides, the compound dreaded by all petroleum refineries for being major cause of refinery corrosion. The above data is evidence that Organic Chlorides came along with imported crude feedstock from either the source or ship’s compartment/tank bottoms.”

The said crude was however pumped into Indeni, a move that caused further damage to the refinery as it was still contending with the effects of corrosion from the batch of feedstock that had been received from cargo ship Mt Sharp Lady, which again had a high level of Organic Chlorides amounting to 31 wt ppm.

On 6 May 2014 the Joint Operating Committee (JOC) considered the matter and resolved that TAZAMA Pipelines should write to Ministry of Energy to recommend that: “effective next shipment, quality data sheets from source/supplier must include organic and inorganic chlorides analyses first”.

The government however went ahead to procure another 80-100,000 metric tones of contaminated crude feedstock, which Indeni refused to take in.

Last year in January, Indeni wrote to TAZAMA questioning the source of the contaminant in the crude feedstock.

“We are in receipt of reports analysis from Intertek concerning latest cargo offloading at Dar by name of vessel MV Alberta.

As per data sheet attached herewith, it is evident that once again, the feedstock components contain a contaminant/poison called Organic Chlorides in excess of 4 ppm against <1.0 ppm maximum allowed,” Indeni stated in a letter dated January 11, 2016.“Our first reaction is as follows: 1. Help us understand fully where this contaminant is coming from and why it is still found in crude feedstock components as this contaminant/poison is not naturally found in petroleum products. 2. Also send us analyses of composite (resultant) Organic Chloride in the final mixture to be blended in the proportion/composition provided by Indeni as follows: Oman Crude oil =44% Gasoil =43% and heavy Naphtha =13%. We look forward to your usual cooperation in this very important and serious feedstock supply risk.”Meanwhile, Indeni failed to process part of the earlier supplied feedstock and it quarantined the crude for disposal, amidst fears that the contaminant would cause further damage to public motor vehicles.In a letter dated April 26, 2016, Indeni wrote to Energy Permanent Secretary Brig Gen Chola requesting to dispose 29,367m3 of feedstock that could not be processed.“Reference is made to the above matter. Indeni has now completed analysing the feedstock. Attached is the quantitative analysis of the contaminated crude oil quarantined at the Refinery. The total quantity being held in the refinery is 29,367m3,” read the letter.“With this information, we hope the process of disposal of the said feedstock to interested parties can now commence. We also hope that the process will not be protracted as the prolonged quarantining of this feedstock in our tanks may have adverse effects on the equipment in the refinery.”

         

Joseph Mwenda

About Joseph Mwenda

Joseph Mwenda is a Zambian journalist experienced in political news writing, photography and video editing.
Email: joseph [at] diggers [dot] news

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James Sinkala
James Sinkala

Interesting!!!

When do we get an update of the on this matter, am sure you are following up the matter with government and when the next hearing is, so on and so forth.

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