• No decision yet on restructure: CPC Chair
• If arrears settled, CPC can be profitable: CPC MD
• Kerosene usage drops
• CEB incurring Rs. 200 m in arrears daily
• US, Chinese, Australian players poised to enter energy market?
• CPC to offer storage to new players in interim

The Ceylon Petroleum Corporation (CPC), which holds debt of over Rs. 230 billion, is yet to consider a reforms process, despite the Government’s stated stance of restructuring all loss-making State-Owned Enterprises (SOEs), The Sunday Morning learns.

This, despite the CPC gearing up to permit three new international players to enter the domestic energy market, which will see the SOE’s stake in the local market decline once the project gets underway.

Both national utilities, the CPC and the Ceylon Electricity Board (CEB), have incurred massive losses and accumulated significant debt over the last few decades, with the Treasury last year finally deciding not to offer subsidies to both SOEs until they make their operations cost effective.

However, the Government seems to be making a consolidated push to reform the much-criticised CEB, with the process expected to commence mid-year following the required legal and policy updates. Nevertheless, the process of reforming the CPC, which also has powerful trade unions attached to it, remains sluggish.

Loss-making is a ‘myth’

Responding to a question from The Sunday Morning, recently-appointed Managing Director of the CPC, former Navy Commander and Chief of Defence Staff Admiral (Retd) Ravindra C. Wijegunaratne stated that if the arrears owed to the CPC from its clients could be settled, the CPC would no longer be in need of restructuring as the SOE was making profits at present.

“The simple fact is that our biggest debtors are SriLankan Airlines, CEB, and West Coast Power Station, which owe us Rs. 230 billion. That the CPC is a loss-making entity is a myth. It is a profit-making entity. In the last two months we have made profits, which is mainly due to the refinery being operational. If such matters are addressed, I don’t think there is a need for a restructuring,” Adm. Wijegunaratne opined.

No action yet

When contacted, CPC Chairman Mohamed Uvais Mohamed confirmed that the SOE was yet to receive any official instructions from the Ministry of Power and Energy on the topic of restructuring the CPC. Unlike the expert committee appointed to look into the CEB restructuring, an expert committee is yet to be appointed for the CPC, Mohamed stated.

However, Mohamed stressed that the CPC and the Ceylon Petroleum Storage Terminals Ltd. (CPSTL) were taking measures to streamline their respective operations to make them more efficient and cost effective.

As a part of such measures taken, the CPC will be equipping nearly 150 fuel browser trucks in its inventory with GPS-based fleet management systems. The Sunday Morning exclusively reported on the completion of the pilot project last month. According to Mohamed, once fully operational, the CPC expects the fuel distribution cost borne by the CPC to be reduced between 15-20%

Attempts by The Sunday Morning to contact Minister of Power and Energy Kanchana Wijesekera and State Minister D.V. Chanaka on the matter failed.

Arrears and new debt

According to the CPC MD, SriLankan Airlines, another loss-making SOE, owes the CPC Rs. 119 billion as of end of January. Further, under the Government’s policy of uninterrupted power supply, the CPC is supplying the CEB approximately Rs. 500 million worth of naphtha and fuel oil to power its ageing thermal power plants on a daily basis.

“Every day to ensure uninterrupted power supply, we give nearly Rs. 500 million worth of naphtha and fuel oil to the CEB. Daily we get a Rs. 200-300 million payment from the CEB. Thus, it is about Rs. 200 million short each day and that number keeps building up to a big amount,” Adm. Wijegunaratne told The Sunday Morning.

New players, new rules?

The Ministry of Power and Energy is in the process of finalising a Cabinet memorandum on new international players who are poised to enter the domestic market, highly-placed sources close to the matter told The Sunday Morning. It is understood that the Cabinet paper will be submitted for approval this month.

According to sources, the three companies shortlisted are from the US, China, and Australia. The Indian Oil Corporation (IOC) has been a foreign player in the domestic market since the early 2000s and has inked a strategic energy project with the Government on the refurbishment of the Trincomalee Oil Tank Farm (TOTF).

It is reliably understood that the three new players who are to enter the market in the second or third quarter of this year will use existing storage facilities of the CPSTL at Muthurajawela and Kollonnawa for the initial stage of their operations once they enter the market. Other storage options, including the possibility of refurbishing a few tanks managed by the CPC at the TOTF, are also being considered as longer-term solutions.  

“The ministry is exploring the possibility of playing a regulatory role by deciding the upper cap on the pricing of the fuel which would be sold by the three players. There won’t be a lower cap. This will force the new player to sell fuel under the upper cap limit. Initially, some of the CPC facilities at Muthurajawela and Kollonnawa will be used for storage by the newcomers, with the CPC earning a storage fee from the use of their tanks,” the source said.

Earlier this month, a high-profile delegation from Sinopec Group visited Colombo and expressed interest in developing a new export-oriented refinery in the south of the island. In 2021, the Sinopec Group joined the Hambantota International Port (HIP) to launch the wholesale supply of marine bunker fuels, together with its subsidiary Sinopec Fuel Oil Lanka Ltd. (SFOL).

It is unclear if the said refinery, once operational, will contribute fuel to the local market. Sri Lanka currently refines only about 28-30% of its fuel needs through the ageing CPC refinery at Sapugaskanda.

Spanner in the works

A Dubai-based energy company which has a chequered history in Sri Lanka and allegations of political favouritism has appealed the shortlisting of the three new international players by the Ministry of Power and Energy, it is reliably learnt.

According to sources close to the matter, the appeal has not pushed the Government to review the shortlisting procedure followed thus far.

Trimming the fat: CPSTL cuts OT opportunities

A few weeks after The Sunday Morning reported exclusively on the CPSTL spending nearly Rs. 1.8 billion on overtime payments to its staff, the Ministry of Power and Energy moved to change the deadline for the weekly fuel quota QR code, thereby changing it from Sunday midnight to Tuesday midnight.

The move is aimed to reduce the need for a high operational level at CPSTL terminals on Sunday, which was one loophole that some staff at the SOE had exploited to rack up nearly double their basic pay in overtime payments. 

When The Sunday Morning reported on the exorbitant payment of overtime pay to CPSTL staff, the CPC Chairman at the time acknowledged that the matter was being reviewed and that the SOE would be taking measures to limit overtime payments to its staff.