Petrotrin plans to sue A&V Oil and Gas Ltd for an estimated US$8 million (TT$54 million) for “fake oil” which it paid for between January and June.
But the crude oil lease operator is fighting back, and vowed to take action against Petrotrin for $70 million it claimed the State-oil company owed them.
The looming legal battles are based on findings of the recently concluded Canadian forensic investigations into actual oil pumped from the Catshill fields and that which was “received” at the Pointe-a-Pierre refinery.
The “fake oil” comprises thousands of barrels for which Petrotrin alleged A&V made claims for payments on the pretext that it pumped the oil from the Catshill fields in Barrackpore and Moruga between January and June.
The release, on Friday, of the findings of Kroll Canada’s forensic audit about the allegations revealed discrepancies between oil production from the lease operator’s tank farms during the period and receipts A&V submitted to State-owned Petrotrin for payments. A Petrotrin internal audit report stated the excess payments amounted to an estimated US$8 million (TT$54 million) or more and could be as much as TT$72 million.
Based on Petrotrin’s board meeting on Wednesday, followed by Friday’s release, chairman Wilfred Espinet told Sunday Newsday, yesterday, that Kroll’s findings were likely to result in civil action against A&V to recover the monies it paid for oil the refinery never received. The company, Espinet said, has already “brought in” attorneys to examine Kroll’s findings with a view to seeking recovery of the hefty sums.
But Espinet also told Newsday that whether or not Kroll’s findings pointed to fraud as was indicated in Petrotrin’s internal audit which contended that senior employees colluded with the lease operator in doctoring oil production levels from the Catshill drilling sites, “is a completely different matter.” The Petrotrin chairman said fraud might or might not have been committed. He explained that each and every discrepancy “does not, necessarily, amount to fraud, or it may not be anything like that at all because if the system was faulty, it has to be corrected.”
Ramesh Lawrence Maharaj SC, acting for A&V, issued a media release in response. He said if Kroll found discrepancies it was the fault of the systems and procedures Petrotrin used to record the supply of crude oil from lease operators to the Barrackpore tank farm. “Such or any discrepancies, even if they exist, do not constitute fraudulent conduct or a breach of contract by A&V,” Maharaj stated.
He also countered A&V will seek to recover $70 million and requested Petrotrin provide a copy of the Kroll report by tomorrow.
“If such or any findings have been made against A&V, the law requires that A&V should have been informed of the allegations and evidence against it prior to the publication of the report, so that A&V would have been given a meaningful opportunity to respond to the allegations and, if necessary, to adduce evidence to negative the allegations,” Maharaj said. However, Espinet went on to say that, based on Petrotrin’s contract with A&V, arbitration might be the avenue through which Petrotrin would seek to recover the money adding it would be the “least expensive” method.
“The likelihood of a success in arbitration or in civil proceedings in the High Court could only be measured by the ability of the company which is based on Kroll’s findings, and there is no definite degree of certainty.
We may succeed; we may not.” It was revealed in October, that Petrotrin had conducted an internal audit of the lease operator’s Catshill’s tank farm which showed production had shot up to remarkable levels during January to July, then subsided drastically. The drastic spike and fall raised a red flag within Petrotrin’s management.
Data analysis demonstrated the volume of crude paid for, based on ticket receipts issued to A&V, was not reflected in Petrotrin’s oil tanks.
Kroll conducted an independent investigation on Petrotrin’s behalf and submitted a report last week to the internal audit committee.
Espinet had disclosed on Wednesday, after Kroll’s report was handed in, that having studied the findings the board felt corroboration was needed by another forensic auditor and Petrotrin retained US oil and gas consultant Gaffiney Cline and Associates.