Shetland Islands Council has been losing tens of thousands of pounds a year because oil companies at Sullom Voe do not pay their bills on time.
An auditors’ check on the workings of ports and harbours operations at Sella Ness revealed that terminal operators BP consistently fail to pay for work within the required timescale and the council has not used its power to penalise the company for late payment.
The SIC owns the loading jetties and spur booms at Sullom Voe but is contracted by BP to do the repairs and maintenance. Under the terms of the contract the monthly invoices have to be settled within 15 days of receipt. But they are never paid on time despite each being posted across the voe by recorded delivery along with a letter reminding BP of the terms of their payment agreement.
In some cases the oil company has been taking as long as 42 days to cough up. A sample of just seven invoices examined by SIC internal audit staff last year showed the council had lost over £12,000 in interest from them alone.
Council managers have now changed the system, warning BP it will be charged interest each time if fails to pay up within 15 days, as it has been entitled to insist upon since an agreement was signed in 1978.
Chairman of the SIC harbour board Alastair Cooper confirmed the problem this week and said the penalties should be imposed.
“We should be invoking that and invoking it very tightly because that is what the legal agreement provides for. There is a problem with the oil industry paying creditors. They are slower at paying and whilst the council is losing money it is probably a bigger issue for some of the smaller private sector folk in Shetland.”
The late payment habit appears to exist in the oil tanker sector too. Tanker agents are required to pay for services at Sullom Voe, such as towage and harbour dues, within seven days of being billed. But a sample of cases showed a failure to pay on time in 17 out of 20 occasions, taking up to 13 days later than the due date.
Indeed, almost every time an invoice was issued the council had to issue what it calls a Stage 1 recovery letter before it got the money. Sometimes the agents were also slow in providing the SIC with the paperwork needed before it could issue an invoice.
The agents’ late payment did not cost the community a great deal in lost interest but the council estimated it would work out at around £10,000 a year. In an effort to eradicate the sloppy practice, the SIC agreed to send a letter to tankers agents reminding them of their requirement to pay up within seven days of an invoice being issued.