Stanley scores Mobil for its pre-conditions

Rep. Stanley T. Torres has slammed Mobil Oil for asking an additional $2.5 million in secured credit limit from the Commonwealth Utilities Corp. plus an offset in gross receipts tax obligations in case of a default—in exchange for considering CUC’s request to let it pay for fuel on a 60-day basis instead of the current 45 days.

“I’m disappointed with Mobil that maybe they are asking too much from us while they are enjoying the business,” Torres told Saipan Tribune yesterday.

The lawmaker said Mobil Oil wants another five-year guaranteed business in the CNMI.

“So I feel like we’re being held hostage by Mobil in their response [to CUC’s request]. I just hope that when the time comes to come up with a new contract, maybe a different company can provide us a better price,” Torres said.

In a July 9, 2008, letter to Mobil Oil Marianas Inc., CUC executive director Antonio S. Muna asked it to give the utility agency a 60-day credit terms instead of 45 days.

In Mobil’s July 23 response to Muna, commercial manager Brian Bamba said the company recognizes CUC’s attempts to improve its current course and therefore, has considered the request.

Bamba said the 60-day credit terms should be on a fully secured basis, in addition to CUC’s line credit ($7.5 million) with the Bank of Guam.

“We will not charge CUC for the additional financing costs of over $60,000 for providing this extended credit facility,” Bamba said.

The manager said Mobil is willing to consider an additional $2.5 million in credit line to CUC “on the premise that the CNMI government provides Mobil with an irrevocable right to offset Mobil’s gross receipts tax, should CUC default on its fuel obligations to Mobil.”

Last July 30, Muna asked Mobil to reconsider CUC’s request. He told Bamba that the 60-day purchase terms conditional to being fully secured is not possible for CUC.

On the tax obligations issue, Muna said pledging an irrevocable right to offset Mobil’s gross receipts tax obligations is beyond CUC’s authority to convey.

Torres agreed with Muna that the 60-day term will allow CUC more time to receive more collections because the 45-day is too short.

“Somehow Mobil doesn’t want to give in unless CUC put another $2.5 million in the bank…that’s my interpretation,” Torres said.

CUC has $7.5 million in the bank as secured credit limit. Part of the contract with CUC is that Mobil will not provide CUC fuel without that amount in the bank.

“But that’s not enough for Mobil. They want another $2.5 million in order for CUC to stretch the term to 60 days,” Torres said.

He suspects that Mobil wants another five-year contract.

On the tax issue, Torres said CUC cannot do that without the Legislature’s consent.