A review of a recent crude oil procurement by the Ceylon Petroleum Corporation (CPC) raises serious questions about governance, consistency, and financial prudence within Sri Lanka’s state-owned fuel importer. At the center of the controversy is a spot tender awarded under unusually restrictive conditions—and later modified in a manner that appears to have directly benefited the supplier at the expense of the public purse.
A tender with built-in limitations
On 24 March 2026, CPC closed a spot tender for three crude oil grades – Midland (WTI), Saharan, and Miri Light – for delivery between 22–26 May 2026.
The tender attracted only a single bidder: Itochu Corporation (Singapore), which offered WTI crude at a premium of USD 37.99 per barrel.
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A demurrage rate far above market norms
Compounding concerns over competitiveness was the demurrage rate quoted by Itochu: USD 350,000 per day. This figure is significantly higher than prevailing market rates for similar crude shipments during the same period. Comparable contracts for Murban crude, for instance, typically carried demurrage rates in the range of USD 100,000 to 150,000 per day.Despite the evident disparity, CPC did not request a revised vessel nomination or negotiate a more competitive demurrage structure. Instead, the offer was accepted as submitted – raising questions about whether adequate commercial scrutiny was exercised.
Rules bent after the fact
The most contentious development came in mid-April 2026, when Itochu requested a revision to the delivery window – from the originally agreed 22–26 May to a new range of 28 May to 1 June 2026.Under standard spot tender procedures, such post-award changes are typically disallowed. Any alteration to delivery terms would normally require cancellation and re-tendering to ensure fairness and transparency. However, in this instance, CPC’s management chose a different route.
Rather than rejecting the request, CPC approved the revised delivery schedule. The decision reportedly passed through the Commercial Division and the Stock Review Committee and is now awaiting final approval at the CPC Board meeting scheduled for 30 April 2026.
Financial impact: A direct loss to the state
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By agreeing to the revised delivery dates, CPC effectively waived its right to enforce demurrage and penalty charges that would have applied under the original contract. Industry estimates suggest that this concession resulted in a financial loss exceeding USD 750,000—a sum that instead becomes a direct saving for the supplier.This raises a fundamental question: why would a state entity voluntarily relinquish enforceable contractual penalties, especially in a single-bidder scenario where negotiating leverage is already limited?
Lost opportunity for competitive pricing
The implications go beyond the immediate financial loss. By initially structuring the tender with a narrow delivery window – and later expanding it after award – CPC may have inadvertently excluded other potential bidders who could have offered more competitive terms.
Had the revised delivery window (28 May–1 June) been included at the time of tender issuance, market participation might have been broader. Increased competition could have resulted in:
Lower crude premiums
More competitive demurrage rates
Better overall commercial terms
Instead, the process appears to have been locked in a single supplier under suboptimal conditions.
A pattern of inconsistency?
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Perhaps most troubling is the apparent inconsistency in CPC’s application of its own rules. Multiple market participants report that similar requests for delivery date changes by other suppliers in past spot tenders have been categorically rejected.
If accurate, this suggests a selective relaxation of procurement rules – benefiting one supplier while others were held to stricter standards. Such inconsistency undermines confidence in the integrity of CPC’s tender process and raises the specter of preferential treatment.
Governance under scrutiny
The decision to approve the date change – despite its financial and procedural implications – points to the involvement of senior management and oversight bodies within CPC. With the Board now set to formalize the approval, accountability for the outcome extends beyond operational staff to the highest levels of decision-making.At a time when Sri Lanka continues to grapple with economic constraints and fiscal discipline, even relatively modest losses – such as USD 750,000 on a single cargo – carry significant weight. More importantly, they signal potential systemic weaknesses in procurement governance.
Conclusion
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The Itochu tender episode is more than an isolated commercial misstep. It highlights deeper concerns about:
Tender design that limits competition
Acceptance of commercially unfavorable terms
Post-award rule deviations
Inconsistent treatment of suppliers
For the CPC, and by extension, the Sri Lankan government – the issue is not just the immediate financial loss, but the precedent it sets. Without transparency and accountability, such decisions risk eroding trust in public procurement processes and exposing the state to repeated, avoidable losses.