Don’t pay: Petrotrin told to get every black cent back

Petrotrin is being told recover every black cent of overpayment from a private lease operator who has been billing the company for oil that was never delivered in the sum of $100 million.

The company, also on the advice of its audit committee, has suspended all payments to the operator and has also been told not to pay outstanding amounts being claimed.

The committee has also concluded that the scam could not have been perpetrated without the involvement of some top management personnel of the Company.

The committee wants appropriate action against those management personnel involved in what has been described in the report as ‘fraud’ by their failure to provide proper accounting of crude oil provided by one of the company’s private lease operators to its Pointe-a-Pierre refinery.

Petrotrin is expected to initiate a full scale investigation this week on allegations that actual oil pumped from wells leased to one of its private lease operators was overstated and resulted in the Company having to pay more than US $11.5 million between January and July for oil not delivered.

Petrotrin has been strongly urged by the audit committee to recover every cent overpaid to the lease operator. It has also recommended that the $45 million being claimed for June and July not be paid until the investigation is completed.

Given the report’s findings that management personnel may have been involved, the audit committee has recommended Petrotrin seek a legal opinion as there was evidence that fraud was perpetrated.

In addition to probing the fraud, the audit committee has requested that Petrotrin now seek to accurately calculate the difference in the volume of oil the operator actually produced from the wells, and the oil actually delivered to the refinery.

It should then recover the monies from the TT$100 million payouts it made between January and July. The alleged fraud is made out in a 31-page audit report headed in part, ‘Investigation into Volume Discrepancies’ which discovered that between January and July, the testing of crude in the oil tanks inland fields drilled by the private lease operator, was inaccurately measured by Petrotrin employees for the purpose of overstating that more oil was supplied than actually produced.

The result was that Petrotrin issued inflated tickets (receipts) to the private lease operator in those seven months. Oil supplies miraculously shot up from a mere 28,628 barrels to a whopping 111,006 barrels in the seven-month period. Petrotrin paid $100 million in the period for oil its refinery never received. But while the report point fingers directly at a senior employee, it emphatically makes mention of six employees who have been interviewed about the various stages of the discrepancies in the measurement process of oil volumes at its tanks farms in south Trinidad.

The report pointed out that the employees who were interviewed, were more intent on seeking the interest of the lease operator in question, than “seeking the interest of Petrotrin”.

The report also alluded to a conspiracy involving middle-management and possibly professionally trained staff in the multi-million-dollar oil scam that spanned over seven months, stating that in April, the company suggested installing ‘test tanks’, “ which so far has not been done. The audit committee also stated that a particular department at Petrotrin should have been conducting individual testing of crude in the tanks, but instead, “ the department (named stated) has been relying on the operator (private lease operator’s) information”. It was therefore easy for the operator to manipulate the well test results, the committee report stated.

Further, the report disclosed that certain supervisors at Petrotrin remained in their vehicles and allowed the private lease operator’s employee to “dip the tank”. About the senior Petrotrin employee, the audit report stated, “He was therefore a willing accomplice to defraud Petrotrin by overstating fiscalised volumes. As a result, Petrotrin was actually paying for crude oil that was never produced.”

But red flags were raised at technical managerial levels at the State-owned oil company, the report stated, as to why the lease operator’s sudden increase of oil production from 70,222 barrels in March to 126,784 barrels in just a month after. A certain department gave the audit committee an explanation that the private lease operator had discovered new wells. But, the report stated, there was a sudden drop to 109, 518 barrels, but suddenly production went up significantly by 37 percent. The audit report stated that the particular department at Petrotrin did not “see this as a red flag that warranted an investigation”.

The report also notes that the company’s Joint Venture Department failed to conduct independent well testing to verify the huge increase from 60,034 barrel to 149,741 barrels, an increase of almost 150 percent in just six months. “Instead, the unverified well test information provided by the operator was accepted by Petrotrin,” the report stated.

It went on to state that several supervisors in a certain department of the company, seemed ‘comfortable’ with allowing the private lease operator to perform ‘dips’ unaccompanied, and were satisfied to simply accept the operators’ figures.

The audit committee found that some of the bulk tanks had not been calibrated and certain supervisors were found unable to calculate the volume of oil when the audit committee requested them to do so.

In light of these findings, the committee recommended in its report to Petrotrin’s president, Fitzroy Harewood, that the company seek a legal opinion, taking into account what it described as fraudulent activity that has been identified in the audit report. Payments should be withheld to the private lease operator for oil supplied to Petrotrin in the months of June and July, until such time the volume of the shortfall of oil that was not delivered, but which was invoiced for, is quantified. The report recommended that termination of the lease operator’s contract is a possibility and that overpayments for oil its’ refinery did not receive but which the company paid for from January to July, should be calculated and recovered.