Threat of petroleum shortage looms large

Following the blockage of the shipment of 40,000 tonnes of petroleum from the Indian port of Mangalore, the country had to turn to Saudi Arabia and Seychelles to make up for the shortfall. If the government wants to be reassuring, major questions on high risks of shortage have been raised in regards to the country’s 10 days of reserve. News on Sunday provides an insight into the matter.

The State Trading Corporation (STC) and Betamax are at loggerheads. In fact the director of Betamax, Veekram Bhunjun, sought and obtained an interim order from the High Court in Karnataka, India, to prevent the ship Pacific Diamond from transporting petroleum from the country’s sole source of petroleum products imports, the port of Mangalore to Mauritius.
While the interim order issued remains in effect until Monday 11th December, the STC has refused Betamax’s demand of a guarantee of Rs 24 million (USD 700,000) to allow the shipment of the 400,000 tonnes of petroleum to Mauritius.

Left with only nine to eleven days of petroleum reserve, the government and the STC had to seek assistance from Saudi Arabia’s petroleum company Aramco and from regional carrier such as the Seychelles to prevent shortage in the country.

Dr Ramchandra Bheenick, Chairman of the STC, reassures that Mauritius will not face any shortage of petroleum in the days to come. “Some are saying that we will have a shortfall while waiting for the cargos to come in. What are their sources to make such statements? As far as the Minister and I know, there will be no shortage. According to all the information that we have, we have a comfortable reserve of petroleum products until the shipments from the Seychelles and Saudi Arabia reach us. The volumes that we will be receiving will be up to 15,000 metric tons. Several arrival dates have been communicated but as far as I know, there is no fixed date. The ships may arrive earlier as well.”

Dr Bheenick explains that the main objective of the STC is to cater for the needs such as that of airplanes. “It is definitely an undesirable situation but we are doing the necessary,” he utters. But what are the risks of shortage? “The risks are real and permanent. Today it was due to Betamax, tomorrow there can be another issue cropping up. There are risks such as: hijacking at sea, ship breakdown, bad weather conditions and cyclones. Anything can happen,” he explains.

Commenting on the matter with Betamax, the Chairman of the STC explains that the way the company was proceeding in the shipment of petroleum was not ideal. “Betamax wanted to ship all the petroleum products in one cargo only. We have changed this by catering one tanker for heavy oil and one tanker for white products. Each tanker arrives every three weeks in the country. There can be an interval of up to 10 days but still the volume of reserve does not get affected. We have a reserve at the port and filling stations also have their own reserves.”

The Chairman of the STC even states that this present situation was anticipated. “We anticipated that we could face a problem. This is why we have come up with a new project.” Dr Bheenick states that the situation and the system changed when the new government took over. “We have noticed that the previous system was not a good method. This is when the STC together with oil majors in Mauritius came up with the Mer Rouge Oil Storage Terminal project where 230,000 metric tonnes of petroleum will be stocked. The project was supposed to be completed this December but there has been a setback. We are on the verge of commissioning it and in the months to come, we will have more security in terms of petroleum products.”

If the present storage system allows three to four weeks of reserve, with the new project, as Dr Bheenick explains, 10,000 to 15,000 tonnes and even up to 25,000 tonnes of petroleum will be stored. Will this be enough to face any future shortage? The Chairman trusts that the Mer Rouge Oil Storage Terminal project is the major solution to the issue. “This project will not only allow us to face any shortage but also to cater for future projects in the country, for example if we have an airplane hub.”

 Minister Ashit Gungah : “No shortage of petroleum”

In a press conference on Thursday, the Minister of Industry, Commerce and Consumer Protection gave the assurance that there will be no shortage of petroleum in the island. “I reassure the public and economic operators that we have enough fuel.” He said that the Saudi company Aramco will supply the country and that the first tanker is expected this weekend. He also added that two additional tankers will arrive in the upcoming week and a fourth one is expected around mid-December.

“Of course, the ships are expected before our fuel reserves run out,” said the Minister, who added that the price paid for the new stock of petroleum products is “reasonable and comparable to what the State Trading Corporation pays.” He also said that the fuel received will last up to January 2018.

Ashit Gungah revealed that other “friend countries” have agreed to help Mauritius. He argued that Betamax’s move before the Indian court has put the country into a complicated situation. The Minister qualified the move as “cruel.”

Betamax

“Betamax does not want to put the country and the economy in jeopardy. All we are asking from STC is to give us a guarantee and respect the spirit of arbitration,” said Veekram Bhunjun, director of Betamax, following the blockage of the Pacific Diamond in the port of Mangalore.

“This is a common practice in all international arbitration proceedings. It allows the party that has obtained favour of the court to turn to all jurisdictions to enforce the arbitration award. Over the last few months, we have tried to find a compromise with STC. The Supreme Court even gave the two parties time to reach an agreement on the bond, but unfortunately, STC chose an unreasonable position,” said Betamax’s legal representative, Rishi Pursem.

The STC is in fact challenging in the Supreme Court the award of the International Arbitration Center of Singapore. The arbitration award of 5th June ordered the STC to pay Rs 4.7 billion in terms of damages to Betamax for breach of contract for the supply of petroleum products of Mauritius from India. Veekram Bhunjun said that he regrets the “irresponsible” stance adopted by STC. “It is not the cargo of petroleum that interests us. All we want is respect for our rights and that the STC acts responsibly. The STC made no provision for the arbitration award. This reckless attitude is putting our country and our economy at risk,” he uttered.

Suttyhudeo Tengur:“Time for our government to negotiate oil with UK and US”

The trade unionist believes that Betamax is in “its right, legally and morally.” Suttyhudeo Tengur says that the STC should furnish a ‘caution’ that will pay for the compensation rounding Rs 4,5 billion that has been awarded to Betamax by a Singapore Court. “The appeal made by the STC is pending before our Supreme Court. There should be a sort of guarantee in case the Supreme Court confirms the award in favour of Betamax. I think Minister Ashit Gungah is joking when he used words like ‘anti-patriot’ towards Mr Veekram Bhunjun.  The latter is just doing things legally.”

He explains that a shortage in petroleum products in the country would affect many. “No fuel, no economy and the population will suffer a lot at the end of this year, as the period of festivities approaches. Furthermore, the economy will slow down and if it does, even for a few days or a week, it will have dire consequences on us all. Food, transport, electricity and water supply and many other things will stop running. Just imagine the consequences.”

Regarding the storage of petroleum, he questions for how long can a small island like Mauritius store its petroleum products? “This needs big investments to increase the storage capacity. Yes, it needs to be reviewed and take it for a period of one month. It is time for the authorities to sort out things in case of some trouble somewhere.” What would be the solutions to this?

“If only, we could have found oil in our ocean territory! On a more serious note, I would suggest government to government negotiations with our friends in India, in the Middle East and even in Europe. The UK and the US are so interested in our seas and islands, time for our government to negotiate oil with them, at least seek their help in time of crisis like this one between the STC and Betamax,” he states.

Banu Seegobin : “A reserve of 30 days more suitable”

The Petrol Retailers Association is favourably welcoming the restocking of petroleum from other carriers. “This helps to address the issue. At our level, the situation is normal and under control. We do not want anyone to panic,” utters Banu Seegobin, spokesperson of the Petrol Retailers Association. Regarding the risks of shortage, he states that it is not huge but trusts that the country’s petroleum storage system should be reviewed.

“For now, there are no big risks, as we are expecting a shipment soon. However in the long run, it is important to review the storage. Instead of having a reserve of only three weeks, I believe that a reserve of 30 days would be more suitable. This will ensure that we will not suffer from any shortfall, especially during the end of year period and also because ships are at constant risks of encountering problems at sea or any other issue.”