• Significant financial losses due to abandonment
• LKR depreciation forces Govt. to halt construction

The project to construct a cross-country pipeline from Colombo Port to Kolonnawa has been abandoned amidst the ongoing economic crisis, the Ministry of Power and Energy announced. 

This decision comes despite the contract already having been awarded and the significant financial losses incurred by the country due to the absence of this pipeline.

Speaking to The Sunday Morning Business, Power and Energy Ministry Additional Secretary Chaminda Hettiarachchi revealed that following the approval of the project by the Cabinet of Ministers in 2020, efforts had been made to award the contract for the construction of the cross-country pipeline from Colombo Port to Kolonnawa. 

However, due to the considerable depreciation of the Sri Lankan Rupee, the project had been subsequently abandoned.

“Even though Cabinet approval was received in 2020, we were unable to carry out the contract despite awarding it due to various reasons, including the appreciation of the US Dollar. As I recall, a letter of acceptance was given to a foreign contractor. However, no further steps were taken to implement the project,” he stated.

In the 2020 Auditor General Report on the Ceylon Petroleum Corporation (CPC), it was disclosed that the corporation had incurred approximately $ 2.7 million in late fees paid to shipping companies over a span of six years. These fees were a result of delays in unloading fuel from vessels, primarily due to blockages in the existing pipeline and inefficiencies in the storage system.

Furthermore, according to the 2021 Annual Report of the Ministry of Energy, the Ceylon Petroleum Storage Terminals Ltd. (CPSTL) had invited limited competitive proposals for the cross-country pipeline project, which aimed to develop an underground pipeline system from the Port of Colombo to the Kolonnawa Terminal. 

After evaluating the received proposals, the contract had been awarded to M/S China Petroleum Pipeline Engineering Company Limited, pending the identification of a suitable lending institution with favourable financial terms through the Department of External Resources in order to finance the project.

However, several development projects had emerged during this period, including the initiation of Liquefied Natural Gas (LNG) transport pipeline projects, plans by the CPC to construct a new refinery, and the Sri Lanka Ports Authority’s engagement in a port expansion project. 

Consequently, concerns had been raised regarding the need to significantly alter the scope of the cross-country pipeline project. As a result, M/S China Petroleum Pipeline Engineering Company Limited had been requested to submit a revised quotation based on the amended project scope, whereupon the Technical Evaluation Committee had assessed the new quotation.