• Cabinet approval sought for shortlisted foreign entities

 The Power and Energy Ministry is poised to submit a Cabinet paper seeking approval for shortlisted foreign companies to enter the local energy market once the ongoing appeal process is completed, The Sunday Morning learns.

It is learnt that three foreign companies have now been selected and all three companies will be permitted to enter the local energy market. However, the final decision on the three companies will be taken once Cabinet approval is given.

It is reliably learnt that the new companies were assured of a cost-reflective price for petroleum products in the market once they arrived in the country.  

Initially, in October last year, Sri Lanka shortlisted 13 foreign companies following the evaluation of all 26 proposals received in response to the Expressions of Interest (EOIs) called by the Government from reputed companies established in petroleum-producing countries for importation, distribution, and selling of petroleum products in Sri Lanka on long-term agreements.

The Sunday Morning reliably learnt that the Chinese Sinopec Group is also among the shortlisted companies.

The decision to open the petroleum market for more foreign players came as the Government struggled to secure close to $ 500 million monthly to import fuel amidst the worst foreign reserves and currency crisis faced by the country.

The EOIs were requested in July and it was said that the Power and Energy Ministry had received proposals from companies interested in the petroleum business based in India, the UAE, Saudi Arabia, the US, China, Russia, the UK, Malaysia, Norway, and the Philippines.

The Government anticipates entering into long-term contracts with the Ceylon Petroleum Corporation (CPC) to ensure a continuous supply of petroleum products to Sri Lanka, whilst engaging in business using existing fuel stations owned or to be opened by the CPC as well as the infrastructure facilities of the Ceylon Petroleum Storage Terminals Ltd. (CPSTL), based on a facilitation fee.

As per the initial plan announced by the Government, the foreign firms must ensure that all products comply with all Sri Lankan quality standards and parameters of petroleum products. The Power and Energy Ministry will also facilitate the development of new fuel stations and storage terminals depending on the requirement of the company post commencing operations in Sri Lanka.

The process was supposed to be completed last year, but it has been delayed for more than six months due to reasons not known to the public.

As the market leader with over 80% of the market share, CPC is operating over 1,300 filling stations countrywide. The CPC refines around 30% of the product requirements through the refinery and the balance is supplied via importation of the refined products. CPC has a two-thirds interest in CPSTL, which has been established with the aim of storage and distribution of petroleum products.

Three companies selected

Speaking to The Sunday Morning, Ministry of Energy Additional Secretary Chaminda Hettiarachchi said that the appeal process was ongoing and that once it was concluded, the three selected companies would be presented to Cabinet for approval. “We have selected three companies but there is an appeal process going on,” he said.

When asked about the companies that have been selected, Hettiararchchi said that the names or origins of the companies would only be revealed once Cabinet approval had been given. According to the Additional Secretary, all three companies will be allowed to enter the market.

When asked whether there were any attempts to increase fuel prices once again, allowing a high profit for the new companies willing to invest in the country’s energy market, Hettiarachchi stressed that there was no such plan but added that the companies had been promised a cost-reflective price for all petroleum products.

Furthermore, the Additional Secretary elaborated that the present quota system would not be abolished given the current foreign exchange crisis, but that the quota would be increased. “The present system will prevail but steps will be taken to increase the quota limit,” he added.

TUs express disagreement 

Nevertheless, the Government’s attempts to open the energy market were criticised by Trade Unions (TUs) attached to the petroleum sector, which claimed that it was an attempt to sell public property.

Speaking to The Sunday Morning, Ceylon Petroleum Common Workers’ Union (CPCWU) President Ashoka Ranwala said the Government was desperately attempting to sell off a public property which was currently bringing in huge profits.

“They increased the fuel prices to convert the loss-making institution into a profit-earning institution in order to sell it at a higher rate. Now they say they are opening up the market as a solution to the present foreign exchange crisis. How can that be possible? What is the strategy they are going to apply? Nothing had been revealed yet,” he stressed.

Ranwala charged that opening up the market for more foreign companies would aggravate the current crisis as the Government would have to provide dollars for them to import the necessary stocks.

“They will come and give us an initial investment, but what will happen afterwards? Like the CPC, they will also start making profits in rupees and then they will take that profit out of the country. Will they take rupees as profit? No. The Government will have to provide dollars for that as well. 

“Also, even if they import fuel with their own money by bringing dollars in the beginning, what will they do afterwards? Those companies too will be dependent on the Central Bank for dollars. Therefore, this is not the answer to the current crisis. What they should do is to start earning dollars. Only then can the current crisis be resolved,” he explained.

CPC opportunities lost 

As learnt by The Sunday Morning, the CPC has two business ventures to earn profits – one is by selling Jet A-1 aviation fuel to the aviation industry and the other is by offering bunkering services to the shipping industry. However, with last week’s Cabinet decision, the CPC has lost the opportunity of earning dollars as Cabinet approval has been granted to allow private companies to supply Jet A-1 fuel to the aviation industry. The country also lost its opportunity to enter the bunkering business when Hambantota Port was leased.

Meanwhile, Energy Trade Union (ETU) Convener Ananda Palitha alleged that the process of opening up of the local energy market was questionable, as it had not been completely transparent.

“The CPC is owned by the public but the Government has failed to reveal any details of its plan to the public at present. It has not revealed its strategy to Parliament either. This is unacceptable. It is the right of the public to know what is happening. The Government is yet to say anything on how it will open up the industry and whether it will pay the CPC for providing infrastructure,” he said.