Sapugaskanda refinery upgrade to cost $ 1.3b

Tuesday, 28 April 2015 01:11 -     - {{hitsCtrl.values.hits}}

By Charumini de Silva Power and Energy Minister Champika Ranawaka yesterday confirmed that the Ministry expects to implement a refinery upgrading and modernisation project at an estimated cost of $ 1,300 million. The Sapugaskanda refinery upgrading and modernisation project is estimated to be completed within four years and once the project is completed, the refinery would be able to produce country’s total requirement of refined products. He said, as per the Energy Sector Development Plan, the configuration of the refinery would be changed from current hydro-skimming type to a cracking type refinery, where low value furnace oil is upgraded into high value petrol and diesel. The Sapugaskanda oil refinery constructed in 1969 produced 100% of the country’s requirement of refined petroleum products until about 1990; however it can now supply only 30% of the refined products for consumption, the Minister said, speaking at a workshop on ‘Downstream Petroleum Industry’ organised by the Public Utilities Commission of Sri Lanka (PUSL) in Colombo. “We are now burdened with ageing and inefficient facilities such as refinery, pipeline systems and storage facilities, development and modernisation of which have been long overdue. Although the need to modernise and upgrade of the refinery has been recognised for quite some time, no action was taken to implement it,” he said. Further he stressed that due to the outdated process in the refinery, it was not capable of producing environmentally-friendly fuels required by the modern vehicle fleet. Hence, modernisation of the refinery would enable Sri Lanka to produce more environmentally-friendly fuels. At present, the refinery produces automotive diesel with a sulphur content of 2,500 parts per million. This would be reduced to 50 ppm after the modernisation, which will enable gasoline and diesel to meet Euro IV and Euro III quality standards. The Minister also revealed that a project has been initiated to rehabilitate pipelines from Kolonnwa to Colombo Port at an estimated cost of $ 45 million. “Some of the existing pipeline systems are over 80 years old and maintenance of these has been neglected, leading to frequent leaks during operation, causing large losses to the State. Due to this scenario, we import 70% of our petroleum requirement as refined products.” Commenting on the shortcomings in the oil procurement process leading to corruption, Ranawaka asserted that serious issues have surfaced relating to the product quality some of which are linked to shortcomings in the procurement process. Actions have been initiated to improve the product procurement and upgrading of the refinery to ensure that quality products are marketed. Thus, the Minister urged the importance of setting up legally enforceable minimum quality standards for petroleum products.

 Transparent fuel pricing formula soon

Govt. to continue development of gas deposits found in Mannar basin

Power and Energy Minister Champika Ranawaka yesterday assured consumers would be given a transparent pricing formula that would mirror international costs allowing reductions to be passed down faster. “Lack of a transparent pricing mechanism for petroleum products is a major shortcoming. Except for a short period in 2002, there has been no laid down pricing policy for petroleum products in the country. Prices have been arbitrarily fixed by the Ceylon Petroleum Corporation (CPC) or the Government, without taking into consideration the fluctuating oil prices in the international market. While upward movement of the international oil prices was passed on to the consumer if it is politically and economically beneficial, downward movement of prices were not passed on,” he said. Therefore, the Minister said a cost-reflective transparent pricing formula, based on international market prices will be introduced soon. “With the formula, consumers would be privy to breakdown of various cost components such as cost of product in the international market, freight and insurance costs, government taxes and marketing margin,” Ranawaka noted. He pointed out that with the implementation of the price formula, the marketing establishments would not be able to hide their inefficiencies in future as every action and activity will be scrutinised by an independent regulatory body. “No longer will those institutions be able to pass unreasonable costs to the consumer,” he added. “In my view we must take appropriate action, not to give undue burden to the consumer with inflated costs. Yet, the utility must also generate sufficient revenue for investment in developing infrastructure such as refineries, storage facilities and pipeline systems. Hence, a transparent cost reflective pricing mechanism would benefit both the consumer and the utility.” He also went on to say that the development of recently-discovered natural gas resources in Mannar basin is a main concern of the Government and would continue despite Indian oil giant Cairn India exiting operations. “Two gas discoveries Dorado and Barracuda have been made in Mannar basin with a potential of two trillion cubic feet of gas. Commercialization of Dorado gas discovery is planned. After gathering gas from the sea bed deposits, the gas will be sent to a processing facility to be constructed at Norochcholai and purified natural as to be transported via pipeline to the power generating plants,” he added. The Minister said that natural gas would be available to use for Sri Lanka’s thermal power plants by 2020.