Sri Lanka has awarded retail fuel licences to three foreign firms including China’s Sinopec, potentially breaking the duopoly of Sri Lankan importer Lanka IOC and state-controlled Ceypetco.
The award comes around two weeks after Sinopec proposed to fully finance the construction of a refinery, expected to have a minimum capacity of 100,000 b/d, in Sri Lanka’s Hambantota district.
Private-sector United Petroleum Australia and US-based RM Parks, which is in collaboration with Shell, were also granted licences to operate in Sri Lanka’s retail fuel market, energy minister Kanchana Wijesekera said on 27 March.
Sri Lanka’s retail fuel market is currently dominated by Ceypetco and fellow fuel importer Lanka IOC, the Sri Lankan subsidiary of Indian state-controlled refiner IOC.
The three firms will each be allocated 150 dealer-operated fuel stations, which are currently operated by Ceypetco, and get 20-year licences to import, store, distribute and sell oil products in Sri Lanka. “A further 50 fuel stations at new locations will be established by each selected company,” Wijesekara said.
This means a total of 450 fuel stations will be allocated to Sinopec, United Petroleum Australia and RM Parks, more than half of the 850 dealers through which Ceypetco currently supplies fuel. LIOC has a network of 211 retail outlets in Sri Lanka.
Sri Lanka has been dealing with its worst foreign exchange crisis since gaining independence in 1948, resulting in fuel, food and power shortages. The country consumes 110,000 b/d of oil products but only produces around 35,000 b/d from its ageing 50,000 b/d Kelaniya refinery. Sri Lanka is completely dependent on crude imports, and its inability to pay for these during the foreign exchange crisis has led to frequent shutdowns at Kelaniya and fuel shortages.
Fuel and power shortages stemming from the foreign exchange crisis had prompted the country to look at allowing more suppliers from oil-producing nations to enter the domestic market. It also finalised a regulation early this year to allow foreign firms to explore for oil and gas in the country.
