- Set to reduce CPC losses
- Auditor General’s report the catalyst
- First launched in 2015
By Madhusha Thavapalakumar
The construction of a cross-country pipeline from Colombo Port to the Kolonnawa Terminal which was launched in 2015 has got a new lease of life after a report by the Auditor General revealed colossal losses caused by the absence of the said pipeline.
The Auditor General recently revealed that the state-owned Ceylon Petroleum Corporation (CPC) paid about Rs. 488 million over the last five-year period to shipping companies as late fees. This was attributed to the delay in unloading fuel consignments at Sri Lankan ports due to the existence of only one active pipeline to transport fuel and insufficient fuel storage facilities.
The Sunday Morning Business uncovered that in mid-2015, a project to construct a cross-country pipeline from Colombo Port to Kolonnawa Terminal received the approval of the Cabinet of Ministers. However, work on the project had not commenced until now.
When we contacted Ministry of Energy Secretary K.D.R. Olga, she stated that the Ministry is aware of the losses caused by the absence of the pipeline and also the recent report by the Auditor General on this matter.
“The Colombo Port to Kolonnawa Terminal cross-country pipeline project was being dragged for years. But our Ministry is planning to complete it under this Government’s tenure. We are having a meeting pertaining to this project this week with the relevant authorities. We understand the losses caused by the lack of pipelines on this route,” Olga stated.
Considering the dilapidated status of the existing – and only – active oil pipeline (12 inch) connecting the Colombo Port and Kolonnawa Terminal, then Minister of Power and Energy Patali Champika Ranawaka in 2015 proposed the construction of a new cross-country pipeline on the same route.
On 17 June 2015, the Cabinet of Ministers approved the construction of the project and to call for international bidders for the project. With no significant development in the project reported during the interim period, on 10 May 2016, then Minister of Petroleum Resources Development Chandima Weerakkody obtained the approval of the Cabinet to implement the said project as a government-to-government (G2G) project considering the dire need for this pipeline.
Accordingly, it was planned that 100% financing of the project on an engineering, procurement, and construction (EPC) turnkey basis would be obtained by receiving only one comprehensive proposal each from the US, China, India, and Malaysia upon the recommendations of the respective embassy/high commission.
The Ministry of Petroleum Resources Development in its 2017 annual report stated that it co-ordinated all the activities of the project with the CPC and Ceylon Petroleum Storage Terminals Ltd. (CPSTL).
“Almost all the preliminary steps of this project such as the preliminary topographical surveys, geographical surveys, initial environmental examination, identification of most suitable (feasible) pipe-laying route, and provision for compensation and remedies to the affected parties have been completed. Now it is in the process of finding funds and selecting a suitable contractor to implement the said project in time,” the 2017 report added.
No major developments were reported in the project up until 15 November last year, on which date China Petroleum Pipeline Engineering Co. Ltd. (CPPECL) on its website noted: “On 30 October, CPP received a letter of award from the owners of the Kolonnawa cross-country pipeline project in Sri Lanka.”
Confirming the awarding of the tender to CPPECL, Ministry of Energy Secretary Olga noted that following the selection of a Chinese company last year, the project came to a standstill, citing that a feasibility study had not been done prior to awarding the tender.
“We are going to do a feasibility study and handover the project to the same company that was selected. They have quoted a cost of $ 50 million. The selected party does not come with a funding agency. We have to find a source of funds through the Department of External Resources (ERD),” she added.
The existing three pipelines from the Dolphin Pier at the Colombo Port to the Kolonnawa Terminal were built in the 1940s for the transportation of petroleum products. Out of these pipelines, two were abandoned many years ago due to the inability to carry out maintenance and repairs as a result of illegal encroachment on the pipeline terrace by squatters.