• Allegations of higher prices linked to Shell franchise fees
• Ministry acknowledges issues; emphasises adherence to contract terms
• Agreement to rebrand 150 stations, expand Shell’s presence in Sri Lanka

The Power and Energy Ministry has sought clarification from RM Parks, a US-based company entering the nation’s fuel market, to reveal the nature of the involvement of Shell PLC, a British multinational oil and gas company headquartered in London, UK. 

An inside source attached to the ministry alleged last week that RM Parks’ misleading use of the Shell brand to secure a contract, despite Shell’s lack of direct involvement in the imports, had resulted in higher costs for consumers. 

The franchise fee for Shell is now embedded in RM Parks’ retail prices, driving up costs at the pump.

In response to the concerns, Power and Energy Ministry Secretary Dr. Sulakshana Jayawardena acknowledged the issue. “This is one of our concerns as well and we have informed them,” he stated.

“They came through the Expression of Interest (EOI) process and are expected to adhere to it. It seems they are experiencing issues with this partnership, but it is their responsibility. They need to follow the terms and conditions agreed upon during the EOI. We will take this into consideration,” he added.

Shell Mobility is the world’s largest mobility retailer, with a presence in over 80 markets and serving 33 million customers daily at 47,000 locations. It leads in fuels innovation and Electric Vehicle (EV) charging, aiming to expand its EV charge points to 200,000 by 2030.

RM Parks Ltd., a licensee of Shell, operates through a partnership with the Tristar Group, a comprehensive energy logistics business serving the downstream oil and gas industry, and RM Parks Inc., a seasoned distributor of Shell fuels in the North American market. It distributes Shell fuels in North America independent of the Shell Group’s official views.

Nevertheless, on 22 March, Shell PLC announced on its website that the Shell brand would enter the Sri Lankan fuel retail market later this year. This follows a retail brand licence agreement between Shell Brands International AG and RM Parks Ltd., as well as a product supply agreement between affiliates of Shell and RM Parks Ltd. 

Under this agreement, RM Parks Ltd. will rebrand 150 retail fuel stations across Sri Lanka with the Shell name. These stations were awarded to the company in a contract by the Sri Lankan Ministry of Power and Energy in 2023 for an initial period of 20 years.

Leveraging Shell’s global expertise in providing quality fuels, lubricants, and services, the agreement will offer Sri Lankan consumers access to Shell’s extensive fuel and lubricant portfolio, as well as options for lower-emission fuels and convenience retail. The first Shell-branded stations are expected to open in the third quarter of this year.

Tristar Group Chief Executive Officer (CEO) Eugene Mayne commented: “This is a great start to 2024 and we look forward to making a strong entry into the downstream fuel industry in Sri Lanka. With a valuable partner such as RM Parks and by harnessing the strength of the Shell brand, the opportunities to grow our footprint in Sri Lanka are unlimited.”

RM Parks Inc. President Jason Callison said: “We are excited to continue our long and valuable relationship with Shell by reintroducing the Shell brand in Sri Lanka after a more than 60-year absence. Our strong partnership with the Tristar Group and the Shell brand presents limitless growth opportunities in Sri Lanka.”

In the meantime, the opening up of Sri Lanka’s petroleum retail sector to foreign investors, overseen by the Ministry of Power and Energy under Minister Kanchana Wijesekera, has sparked widespread controversy and raised serious questions about the efficacy and transparency of the process. The Government decided to privatise 450 petrol stations owned by the State-run Ceylon Petroleum Corporation (CPC), allocating them to three new companies – Sinopec, RM Parks, and United Petroleum.

This move is alleged to have led to significant financial losses, operational delays, and increased costs for consumers, prompting calls for urgent corrective action to address the flawed implementation and restore public trust.

As alleged by industry sources, the petroleum retail sector liberalisation has resulted in significant financial and operational issues. As they highlighted, the issues included the handing over of profitable CPC petrol stations without any capital investment or payment, which has led to billions of rupees in immediate financial losses.

Additionally, delays in operations by RM Parks and United Petroleum have prevented over $ 1 billion from being repatriated to Sri Lanka. The pricing mechanism, which bases retail prices on the highest import costs among all players, has caused inflated prices for consumers. Furthermore, United Petroleum’s inaction has intensified doubts about the effectiveness and intentions behind the privatisation process, they alleged.

In response to the concerns raised, Dr. Jayawardena stated: “I am not sure how they calculated the losses as $ 1 billion for the Government. Previously, the CPC imported the country’s petroleum requirements and distributed them through its own mechanism. Now, part of this distribution is handled by a few parties that import the necessary quantities themselves. 

“The total quantity was previously imported by the Government. Due to the issues faced by Sri Lanka in 2022, as in other countries, there are both local and foreign players, and the Government does not necessarily dominate the sector.”

He further explained that when foreign investors were invited, they were allowed to repatriate a reasonable profit earned through the process, as this was a key requirement of Foreign Direct Investment (FDI). Regarding the cost, he noted that it included all expenses related to importing petroleum and operational costs, including taxes and commissions for dealers.

“We basically calculate the previous month’s cost for the CPC and set the upper ceiling based on that. This is the maximum price they can sell at. For example, Sinopec offers at Rs. 3 below the upper ceiling. We do not consider RM Parks’ costs when calculating fuel prices; we only consider the CPC’s costs,” he clarified.

Meanwhile, Ceylon Petroleum Common Workers’ Union (CPCWU) President Ashoka Ranwala raised concerns about whether Sri Lanka was reaping the anticipated benefits from liberalising its petroleum market. 

He pointed out that the country was now facing a dual challenge: spending foreign exchange to import petroleum products and allowing companies to repatriate profits earned from their sales.