Questionable Coal Shipment Arrives Amidst Controversy
- Conflicting Sampling Certificate Raises Integrity of 56,000 Ton Shipment
- Two Certificates Of Sampling And Analysis – For Same Cargo?
By Faraz Shauketaly
The latest shipment of coal to arrive in Sri Lanka has caused all related parties to be wary of the quality of the coal that was loaded for delivery to Sri Lanka. 55,594 Metric Tonnes of Indonesian Steam Coal in bulk was loaded on board MV Prabhu Parvati at the port of Muara Berau, East Kalimantan in Indonesia with a certificate of Sampling and Analysis issued by a company called ‘Sucofindo’ in Indonesia. The Certificate No 57479 – a copy of which The Sunday Leader is publishing exclusively – was issued on October 29 and has caused alarm bells to ring.
The document clearly shows that the coal that was loaded on board this vessel was at variance with the standards required by Sri Lanka and exercised via Lanka Coal and monitored by the Ceylon Electricity Board which operates the coal power plant in Norochcholai.
Our sources indicate that the failings are three-fold. The moisture content was 17.9 percent, Sulfur was 1.17 percent and the all important Gross Calorific Value was set at 5643 Kcal/Kg. The standard required by Sri Lanka is at least 6000 Kcal/Kg.
The Sunday Leader called Chairman Lanka Coal, Tissa Herath and asked if this was the case why was the coal allowed to be loaded on board MV Prabhu Parvati. Herath disputed the figures saying the document in his possession showed a Gross Calorific Value of 6097 Kcal/Kg – within the acceptable range. The Lanka Coal Chairman added that a further independent sampling certification was underway at the port of discharge – Colombo – which was being carried out by a separate company. Until then the Chairman asked why there was a need to ‘jump the gun’. Frankly, with the information within our purview, the gun has already been fired.
The testing process in Colombo is being carried out by the reputable Swiss-based company SGS. The Sunday Leader sent an e-mail to SGS asking if they would share the findings in this instance citing national interest – the coal being destined for the 300 MW Norochcholai power plant upon which the entire country depends for a substantial portion of the electricity being utilized. At the time of going to press apart from an e-mailed acknowledgement from the Swiss head office of SGS, the local office had not responded.
The circumstances surrounding the award of the supply of coal connected to this shipment itself has been shrouded in some mystery as the contract to supply coal for this present year was awarded to a company called Noble Group of Singapore – one of the largest commodities trading companies in the world. Noble however are not the shippers of the latest consignment of coal.
Industry sources attribute the award of a total of 5 shipments to a company called Taurian Iron and Steel – in spite of the fact that Noble are the current suppliers – apparently as a token of appreciation for an un-named ‘consultant’s’ help in disposing off of a ship load of coal, the unloading of which could not be carried out due to poor weather conditions off Norochcholai. That delay was in turn attributed to a debatable and moot point: one side says they did not delay to collect the consignment of coal whilst the others say the coal was not ready when it should have been. Be that as it may, when that particular consignment was eventually loaded and brought to Sri Lanka the weather patterns had changed and unloading did not take place. Brokers then transacted a ‘deal’ in which it was agreed that the consignment would be purchased as ‘distressed cargo’ thereby helping to stem the losses that would accrue to Lanka Coal.
However the so-called ‘additional’ or ‘interim’ supplier of coal appears to have shipped sub-standard coal to Sri Lanka. Sub-standard in this scenario would be not up to the specifications asked for by Lanka Coal and or the Ceylon Electricity Board. Our sources from within the industry have confirmed that tests carried out in Sri Lanka have revealed that the moisture content in the present consignment of nearly 56,000 MT was as high as 17.3 percent to 17.5 percent. The acceptable benchmark was said to be 16 percent. On this basis alone, under ordinary circumstances the shipment would have to be rejected. The certificate issued at the port of loading had a figure of 17.9 percent for moisture content.
At the time of going to press The Sunday Leader became aware of the SGS testing process in Colombo and unconfirmed reports stated that the moisture content was between 17.3 percent and 17.5 percent. We contacted SGS who declined to confirm or deny our information only to state that the testing process was ongoing and that in any event information of the nature we sought would be forthcoming only from Lanka Coal directly.
At Lanka Coal, Chairman Tissa Herath played it rather cool: he told us that testing was on going and that he did not expect that to be completed until Monday or Tuesday next. Thereafter the findings would be sent to India and only then would a final decision become available. However in his conversation Herath pointed out that the testing at the load port was done by a company called Geo Chem and that the early signs are that the findings thus far in Colombo were consistent with those found by Geo Chem in Indonesia. There was no explanation as to why a sampling certificate was issued by Sucofindo of Indonesia for precisely the same cargo consignment. To say the least, it is more than unusual for two companies to provide certificates at the loading port. It almost beggars belief. Of course it only compounds matters that one certificate is apparently so much at odds with the other.
Herath pointed out that this present consignment was a transaction done with yet another state agency, Ceylon Shipping Corporation and that ‘all these transactions are very transparent in nature’.
The difference in the price of a higher grade coal (calorific value in excess of 6000) can result in significant savings or even additional expenditure. The difference per ton is at least USD 30 or for a 56,000 MT consignment, a cool USD 1,680,000 or Rs. 218,000,000 (Rs 218 Million).
Separately it had been reported in the Indian press that a testing and sampling certification company called Geo Chem Laboratories had been issued with a show-cause notice after two suppliers M/s Bhatia Ltd. and M/s Adani Ltd. had their supply contracts to Mahagenco terminated. Both suppliers found that although their supply contracts were to run till February 2011 the contracts were terminated in December instead. The Indian power giant, Mahagenco has set norms for the Gross Calorific Value (GCV) at 6,300 Kcal/Kg. According to reports the supplied coal to Mahagenco was found to have been 700-800 Kcal/Kg less – resulting in the early termination of their contracts.
Quality Testing and Standards is big business in any part of the world with many governments insisting that importers rely on such services to ensure conformity on a number of separate fronts. Some companies offer rates that are at times impossible to sustain on their own and instead rely on a subsidy from companies allied in some way or another to the consignment being tested. This practice is not ethically correct but nevertheless given the huge ‘over the top’ margins, is a practice that is frequently resorted to. For instance if the going rate for testing of coal is Rs. 15 per kilo, there have been instances in other markets of the testing price being quoted at around Rs. 2.50 per Kg. At such low prices the testing company is either acting with little regard to their real costs, are being subsidized by a government agency or allowing their services to be compromised of its independent nature.
Primarily due to the fact that Sri Lanka is aiming at being an agri-based economy and due to the value of the environment in terms of tourism, Sri Lanka’s lone coal-powered plant was designed to use ‘clean coal’ and the specifications were set in place to ensure those guidelines were met whenever coal was being purchased.
Industry sources were at a loss to understand why two lots of certification appear to have been issued at the load port. Efforts were underway by The Sunday Leader to establish quite how this very strange set of affairs came about, at the time of going to press. As Alice in Wonderland said, it just gets ‘curiouser and curiouser’ by the day. (firstname.lastname@example.org)