Pentagon issues new fuel contracts to supply Iraqi civilians

The US Department of Defense's Defense Fuel Support Center (DFSC) Mar. 8 awarded a total of $309.7 million in contracts to help meet civilian fuel demand in northern Iraq.

Winning bids came from one US company and six Turkish firms that submitted bids to supply diesel, liquefied petroleum gas, and gasoline to a population facing cooking and transportation fuel shortages over the next several months.

The contracts run Apr. 1-June 30. DFSC said they received 22 responses from its world wide web-based proposal. DFSC also solicited bids for civilian fuel supplies in southern Iraq; that award will be announced in the next couple of weeks.

DFSC officials said the average price the US military will be paying for the fuel is as follows: $1.24/gal for diesel, $478.60/tonne for LPG, and 1.19/gal for gasoline. All of the fuel contracts will be met on a fixed-price basis with an economic price-adjustment clause. Kuwaiti-based Public Warehousing Co. will oversee the fuel contracts under a separate management contract that extends April-October (OGJ Online, Jan. 15, 2004).

Winning bids

Refinery Associates of Texas Inc., New Braunfels, Tex., was awarded the largest contract, listed at $108.5 million. Other winning bidders and their contract amounts are: Turcas Petrol AS, $59.3 million; Opet Petrolcul UK AS, $55.1 million; Petrol Ofisi AS, $35.4 million; Delta Petrol Urunleri Ticaret AS, $18.2 million; Iprgaz AS, $17.3 million; and Tefirom Construction & Energy Co. Ltd., $15.9 million.

Tefirom is based in Ankara, Turkey, while the other five Turkish firms are based in Istanbul.

The US Army Corps of Engineers, instead of DESC, originally controlled fuel supply contracts. The imports were included under a sweeping USACE sole-source contract given to Halliburton Co. subsidiary KBR in the spring of 2003. KBR's fuel costs later came under scrutiny by US lawmakers and in an internal Pentagon audit.

KBR still is supplying fuel in the south; it also continues to restore Iraq oil infrastructure, but only in the southern part of the country. Under a USACE contract awarded Jan. 16, a joint venture of Parsons Corp., Pasadena, Calif., and Australia-based Worley Group will be taking over infrastructure repairs from KBR this month in the north.

Back in the US, Halliburton is conducting its own internal audits on fuel purchases. It also recently cautioned in a recent Securities and Exchange Commission filing, that "it is possible that we may, or may be required to, withhold additional invoicing or make refunds to our customer, some of which could be substantial," the company said in its annual report. "This could materially and adversely affect our liquidity."

But Wall Street investors currently do not seem to view the SEC disclosure news as particularly damaging to the company; the stock price fell less than $1 in trading on the day the SEC report was made publicly available. The company's business in Iraq is now only about 25% of revenue.

Congress has not yet held hearings on the disputed Halliburton contracts despite pleas by some Democratic lawmakers. However, the issue was expected to be discussed Mar. 11 during a House hearing on Iraq reconstruction.