CPC mulls $ 20-30 m investment to develop 25 oil tanks in Trincomalee

Friday, 19 June 2020 00:22 -     - {{hitsCtrl.values.hits}}

By Charumini de Silva

The Ceylon Petroleum Corporation (CPC) is to develop 25 oil tanks in Trincomalee with an estimated investment of $ 20-30 million, a top official told the Daily FT.

The move is aimed at creating a robust fuel storage and distribution network in the North, East and North Central Provinces.

“Discussions on Trincomalee oil tanks began during the COVID-19 lockdown period as we felt that the storage capacity in Colombo was reaching full capacity. We requested Government support to take over 25 oil tanks from the remaining 84 tanks and renovate them,” CPC Chairman Sumith Wijesinghe said.

Noting that a thorough feasibility study had already begun, he said the venture would entail an estimated investment of $ 20 to $ 30 million.

“At present we distribute fuel to the entire country through our main storage facility in Colombo. If the proposed 25 tanks can be developed accordingly, the Government will be able to store fuel required for two to three months with cost-efficient distribution options for the North, East and North Central Provinces, thereby saving money for the Government,” Wijesinghe added.

He also said upon approval from the Government, CPC would be able to commence renovation work at the 25 oil tanks, a process which is expected to be completed within two years.

The CPC Chairman believes that the move will help the State-owned giant save a significant amount of money allocated for transportation, labour and wastage.

In 2003, Lanka IOC (LIOC) — a subsidiary of Indian State-owned IOC – bought a one-third share in Ceylon Petroleum Storage Terminals Ltd., which operates the China Bay tank farm. The CPC entered into a MoU with Lanka IOC to grant a long-term lease to the Indian firm for operating the 99 storage tanks at Trincomalee for 35 years for an annual fee of $ 100,000.

However, the 35-year lease finalisation dragged on for years, and trade unions and different factions of society questioned the Government plans for the 99 storage tanks, each with a capacity of 12,100 tons.

During the previous regime the Cabinet approved a proposal to have complete land ownership under Government, hand over the complete ownership of 15 tanks to LIOC, and rebuild the remaining 69 tanks through a Joint Venture to get complete ownership of 16 tanks to CPC.

However, the CPC Chairman said lack of Government enthusiasm to engage with all parties involved in the project previously ended up with no progress on the Trincomalee oil tanks.

Wijesinghe said a few rounds of talks between LIOC, CPC and the Government took place during the lockdown, but they were still awaiting a response in this regard.

“LIOC did not express interest in taking over more oil tanks during the discussions,” he added.

According to the LIOC Annual Report 2018/19, the firm invested Rs. 319 million in Trincomalee and commissioned an additional tankage which increased the bunker fuel storage capacity.

“The company has continued to invest in strengthening the bunkering infrastructure at the Trincomalee Port. Trincomalee is the only port in Sri Lanka offering ultra-low sulphur MGO for niche customers. Trincomalee offers many natural advantages like a sheltered anchorage with minimum impact of the monsoon season where safe bunkering operations can be carried out throughout the year. Our presence at Trincomalee has encouraged vessels to dock at the port, promoting Trincomalee as a hub in the maritime route,” LIOC said.

In addition, rehabilitation of tanks at Trincomalee Terminal was also mentioned in the Annual Report Outlook 2019/2020.

LIOC has a commitment to pay $ 100,000 per annum to the Government of Sri Lanka as lease rental for storage tanks at Trincomalee used by the company.