PIL explains fuel tender

Petroleum Importers Limited (PIL), a consortium of private oil marketing companies, has denied accusations of foul play and lack of transparency in the recent award of fuel supply contracts in the country.

Reacting to a story in The Nation edition of August 19 2016 where two of the bidders—Independent Petroleum Group (IPG) of Kuwait and Vitol Bahrain E.C of Bahrain—cried foul, accusing the consortium of engaging in inside trading and technically pushing the price of fuel up for allegedly buying from suppliers that may be expensive, PIL general manager Enwell Kadango said the accusations were surprising as the tender award process was transparent.

He said: “The tender process has been managed by PIL for the last 16 years with largely same procedures being followed up until now. Vitol and IPG have participated in previous tenders and have been given supply contracts before.

“It is surprising now that they are raising these points which they have not raised over all these years, even during the time they were supplying us.”

Kadango said this year’s tenders had delayed because State-owned National Oil Company of Malawi (Nocma) had wanted to wholly take over the importation of fuel contrary to its established mandate which, among others, is to manage strategic fuel reserves. He added that the regulator, Malawi Energy Regulatory Authority (Mera), and other stakeholders were represented at the opening of the sealed tender bids.

He said pricing constitutes about 50 percent of the consideration criterion hence it was misleading to suggest that PIL had engaged expensive suppliers, thereby pushing up the cost of fuel at the pump.

Said Kadango: “Award of successful bids is based on what each one has offered in terms of premiums from various ports while considering other factors as well. Bids are opened in full view of all bidders and results are announced same evening.”

He added that PIL was in fact making a $5 million saving for engaging the successful suppliers and was directly passing the same to consumers.

In the story, the two bidders alleged favouritism and sought Mera intervention.

However, Mera spokesperson Fitina Khonje said the regulator had no jurisdiction on contractual matters between PIL and its bidders.

Vitol is currently a supplier to Nocma from their 2013 contracts.

The development comes against a background of PIL and Nocma fighting over control of fuel imports. The two parties settled for a 50:50 share following severa meetings that were heard between them but Nocma later wanted 100 percent business.

Discussions between the two have stalled because Nocma board has not responded to the letter from PIL confirming the 50:50 volume share that was written to them on May 6 2016.

In the letter, as seen by The Nation, PIL is asking Nocma Board to consider a long term contract which up to this day has not been answered. Meanwhile PIL has to proceed floating the tender in March so that the country does not suffer fuel shortages beginning July 2016 as previous contracts expired in June this year.

Kadango further advised that as for the suppliers in question, Vitol did not submit a bid because they must have expected Nocma to be the ones to tenders.

He said: “Where in the world does a potential bidder complain before even submitting their bid? A bidder alleging favourtism before knowing who has bidded. Something is surely fishy here. The same supplier has supplied this market before and why did they not complain of the process and set up before. We have a strong belief that this is a make up of the same battle of who should be importing fuel for this country.”

As for IPG, Kadango said the supplier had issues with PIL which went unresolved for three years involving the supplier not paying the net amount due to PIL when the contract was closed. However, PIL still awarded them a 25 percent share which they declined wanting more.

Kadango said it was amazing to note that while PIL agrees to share the volume 50:50 with Nocma, the government agency is mum to date.

PIL—owned by Puma Energy (Malawi) Limited, Total Malawi, Petroda (Malawi) Limited and Engen—imports 90 percent of the country’s fuel requirements.

PIL was formed to ensure security of supply after then State-owned Petroleum Control Commission (PCC) collapsed and has since 2000 run an efficient and cost effective import operation.

Its birth followed a recommendation of the Malawi Government, the International Monetary Fund (IMF) and the World Bank.