A scandal-hit company had a fuel transport contract extended by Enemalta for 26 consecutive months with no call for tenders being made. This emerges from the Auditor General’s review of Enemalta’s fuel-buying committee tabled in Parliament on Monday.
The Auditor General described as “tenuous” Enemalta’s explanation that it kept extending Island Bunker Oils’ contract repeatedly because privatisation of the petroleum division was “imminent”.
Although privatisation was first mentioned in Enemalta’s 2006 annual report and reiterated in the 2008, 2009 and 2010 reports, it never happened. The petroleum division has not been privatised to this day.
The Auditor General noted that in two short-term contracts awarded to different companies to bridge the gap between one extension and another, Enemalta inserted a clause giving it the right to terminate the contract if privatisation happened.
Island Bunker Oils was awarded its first six-month contract in January 2008 to transport diesel and kerosene by barge to Enemalta’s storage tanks. It included a six-month extension option that Enemalta took up.
The Auditor General described Enemalta’s explanation as tenuous
The company was implicated in the oil scandal that rocked Enemalta earlier this year. Three ofits directors – Anthony Cassar, Francis Portelli and Tancred Tabone – were accused in court of bribery and trading in influence.
The charges in this case – unrelated to another case involving fuel procurement by Enemalta – relate to preferential treatment afforded to Island Bunker Oils on bunkering arrangements when Mr Tabone was chairman at the State energy corporation.
The Auditor General found that the original contract for fuel transfers with Island Bunker Oils was subsequently extended for a 26-month period at a higher rate.
Enemalta justified the rate increase by noting that it had started importing diesel with lower sulphur content and that, to prevent contamination, Island Bunker Oils had to clean the barges before transportation.
The Auditor General said the only disruptions to the extended contract came between April and August 2010, for which no documentation was available, and a one-off contract for 84 hours of service awarded to Bunker Supplies Malta Ltd.
Two years ago, under the aegis of then finance minister Tonio Fenech, the corporation had issued a tender for the fuel transfer service.
The award was delayed after Island Bunker Oils protested, but the protest was turned down by the Contracts Department.
ksansone@timesofmalta.com
When Enemalta bought low quality oil
With fuel stocks running low, Enemalta had to accept a more polluting oil not to compromise electricity generation, according to the Auditor General.
This happened in September three years ago but only came to light this week in the Auditor General’s report on the corporation’s fuel buying committee.
Enemalta had to accept a delivery from Dutch oil firm Trafigura of heavy fuel oil with one per cent sulphur content instead of 0.7 per cent as fuel stocks ran low.
The State energy corporation had started using the better quality low sulphur fuel oil in May 2010 as part of a drive to reach EU emissions targets.
However, the Auditor General found no formal documentation of the incident when he came across it during his investigation.
The acceptance of the lower quality fuel was sought from “a higher authority” but the Auditor General noted that written authorisation was not available on file.
“Enemalta stated that such confirmation was obtained by means of a telephone conversation,” the Auditor General said.
He highlighted this incident as an example of Enemalta’s poor record-keeping when taking decisions of all sorts, including crucial ones such as the logistical coordination of fuel shipments.
The Auditor General noted that Enemalta had telephone conversations with its suppliers where key logistical issues, such as changes in quantity to be delivered, delays in delivery and pricing, were discussed, yet “not formally documented”.
“This shortcoming is perhaps most accentuated with respect to case study 4A, in which case Enemalta stated that, due to low levels of stock, a delivery consisting of lower quality fuel oil was accepted, with no written approval traced in relevant files authorising the approval of such deviations from agreed standards.”
This followed on the back of revelations that the fuel procurement committee’s minutes were missing or contained sparse and, at times, illegible information that made it hard to trace what decisions were taken and by whom.