AG recommends use of Trincomalee Oil Tank Farm to address several issues in energy sector 

Monday, 21 September 2020 00:00 -     - {{hitsCtrl.values.hits}}

  • Releases Special Audit Report on storage and distribution of petroleum in SL 
  • Says high risk of fuel shortages due to lack of storage facilities
  • Observes economic and other disadvantages resulting from unnecessary emergency purchases can be done away with adequate storage facilities 
  • Warns pipeline system used for unloading and transporting fuel obsolete and in risky condition
  • Says giving priority to fuel transport through bowsers instead of using railway wagons is immensely unfavourable

By Chandani Kirinde 

A Special Audit Report on the storage and distribution of petroleum in Sri Lanka has recommended that the Trincomalee Oil Tank Farm be renovated and used to address a number of issues in the energy sector including storage in fuel shortage facilities and risks and costs associated with land transportation of fuel.

The audit report released by the Auditor General’s Department recently said that at present there exists in the country a high risk of fuel storage due to lack of storage facilities and this should be overcome and the storage capacity should be increased so that the fuel requirement of the country can be stored for several months.

At present the entire capacity of fuel storage in the country is adequate for requirement of diesel for 27 days, petrol for 24 days, kerosene for 29 days and aviation fuel for 40 days.

The audit report said that adequate fuel storage facilities in the country should be maintained to do away with economic and other disadvantages resulting from the unnecessary emergency purchases.

Study on the fluctuations in world market oil prices should be conducted in a systematic and timely manner and adequate quantities of fuel should be obtained and stored in the event of falling prices such as the recent experience of a significant drop in world market oil prices during the COVID-19 pandemic.

The AG also recommended that in entering into term contracts with international oil suppliers for oil purchases, a formal study should be carried out on the term contracts followed by other countries similar to Sri Lanka to identify more appropriate terms and conditions. Priority should be given to enter into agreements with the State instead of entering into agreements with private companies in other countries, the report said.

According to the Annual Report for the year 2019 of the Central Bank of Sri Lanka, the annual expenditure on importation of crude oil and refined products is approximately Rs. 657 billion and it represented 18% of the total expenditure on importation of the country.

The audit report raises several safety issues due to the land transportation of fuel as well as at unloading oil terminals.

The AG also warned that the pipeline system used for unloading and transporting fuel is in an extremely obsolete and risky condition and it is very dangerous to delay renovations to these pipelines and should be a priority for the country.

It said that the existing pipeline system for unloading oil in the vicinity of oil tank complexes should be renovated to avoid possible risk in unloading oil at the two main terminals set up in a densely populated area. This way, public protests or environmental damage should be minimised, and an uninterrupted oil supply within the country should be ensured.

The report also said that by limiting oil transportation by bowsers from Colombo and its suburbs to outside areas, there would be a reduction of traffic congestion in Colombo and its suburbs, less environmental damages and reduction in the high cost of transportation.

The report recommended the use of railways as much as possible for fuel transportation from the main terminals to the regional depots as well as for fuel exchange between the depots. 

It added that since railway wagons can be easily handled from the Trincomalee area, it should be managed in a more systematic and economical manner to reduce fuel transport costs.

The bunkering oil business, which can be easily operated given Sri Lanka’s geographical location, should be systematically implemented within the country to enable its implementation as a foreign exchange earning investment opportunity.

The auditory also recommended that measures be taken to enable implementation of business facilities such as fuel re-importation as a regional energy hub, as presently operative in the countries such as Singapore.