Gammanpila justifies economics behind closure of Sapugaskanda refinery

• Says 2.32 barrels of crude oil required to produce a barrel of petrol or diesel 
• Claims direct importation of refined products is Rs. 15 cheaper due to the duty structure
• Stock of 13,500 tons of furnace oil available to be used for electricity generation in future
• Refutes trade union claims on possible power cut
• Says people should be happy to have uninterrupted supply of fuel when economic powerhouses grapple in energy crisis globally

 Energy Minister Udaya Gammanpila yesterday justified the economics behind the temporary closure of the Sapugaskanda oil refinery for 50 days, refuting the claims of the Opposition and the trade unions.

“We need, on average, 2.32 barrels of crude oil to make one barrel of petrol and diesel in our refinery. In October, a barrel of crude oil was at $ 85, diesel at $ 93 and petrol at $ 95. To purchase 2.32 barrels of crude oil, it cost around $ 197. Hence, we decided to import the finished product to save foreign exchange,” he told journalists at the Ministry yesterday.

The Minister said foreign reserves saved through non-importation of crude oil will be directed towards purchasing petrol and diesel until the foreign exchange situation is resolved. On Monday, the Energy Minister declared that the Sapugaskanda oil refinery will be closed for 50 days to manage the limited foreign reserves to import essential items to the country — a decision that he announced on 29 September.

The Minister also pointed out that there was only a Rs. 5 profit in the refinery process at Sapugaskanda, while there is a Rs. 15 saving when we import the finished product due to the duty structure. 

The 51-year-old Sapugaskanda oil refinery produces 37% of furnace oil and naphtha, 19% jet fuel and kerosene, and 43% for the production of 14% petrol and 29% diesel.

“At a time when many economic powerhouses are faced with energy crisis around the world, Sri Lanka being a non-oil producing country, with no sufficient foreign reserves, no adequate storage tanks have managed to secure an uninterrupted supply of fuel. Not only the trade unions, the entire country should be happy about it,” he said.

The Minister also said there is a stockpile of 13,500 tons of furnace oil produced from a previously imported crude oil stock, thus refuting the claims on a power cut in the coming days due to non-availability of crude oil.

“Considering the heavy rains experienced over the past weeks, Ceylon Electricity Board (CEB) has informed that over 50% of the power is generated via hydro plants and there is no requirement to use fuel for electricity production at present. The stock of 13,500 tons of furnace oil can therefore be sold to the CEB in the future,” he said, assuring there will be no shortage of fuel or possible power cuts in the country.

Gammanpila also added that if he were to import crude oil, the Treasury must grant him foreign exchange, and that the Ministry is currently in the process of formulating methods through which the Treasury can earn much-needed foreign exchange.

“The bitter truth is the trade unions don’t accept that the protests don’t earn us any dollars. Trade unions must think more practically and pinpoint alternative methods to earn foreign exchange if they truly care for the organisation and the country. As the Minister, I have no ability to earn dollars,” he said.

Gammanpila also claimed that any investor can enter into the refinery business with no licence required as per the law. 

“This is why we wanted to amend the law to include a licence for the refinery business, but our trade unions protested for that too,” he said in response to the trade unions› protest demanding for the re-opening of the Sapugaskanda oil refinery.

He pointed out that there is no monopoly for the State-run Ceylon Petroleum Corporation (CPC), noting that Lanka IOC, a subsidiary of the Indian Oil Corporation, has the licence to distribute and sell oil in the country.