• Concerns over minimum purchase order
• IOC to fund pipeline

Sri Lanka is awaiting India’s response to its observations on the initial Memorandum of Understanding (MoU) for the proposed multi-product oil pipeline project, The Sunday Morning learns.

The pipeline, proposed to be funded by Indian Oil Corporation Ltd. (IOC), aims to establish a network connecting Nagapattinam in India to the Trincomalee Oil Tank Farm and Colombo.

Ministry of Power and Energy Secretary Dr. Sulakshana Jayawardena has submitted comments on the draft MoU, but is yet to receive a reply from the Indian side.

As previously reported by The Sunday Morning, the proposed pipeline includes a provision for a minimum purchase commitment. Sri Lanka has submitted a review of this clause, stipulating that the Government may be obligated to make payments if Sri Lanka fails to meet the required purchase volume.

Dr. Jayawardena said that the proposal was still in its early stages and that no final agreements had been made. He also noted that the IOC was investing in the project but that Sri Lanka could not dictate sourcing requirements to other key players involved, such as the Ceylon Petroleum Corporation (CPC), Lanka IOC (LIOC), RM Parks, United Petroleum, and Sinopec.

The pipeline, which will run from India to Muthurajawela and Trincomalee, is intended to serve as both an import and export route. The proposed clause requiring a minimum purchase volume could impose financial obligations on Sri Lanka if the volume is unmet. This is particularly concerning given Sri Lanka’s refinery and oil export system plans.

Discussions about the pipeline began in February following talks between Power and Energy Minister Kanchana Wijesekera and IOC officials during the ‘India Energy Week 2024’ in Goa. The pipeline’s main goal is to enhance Sri Lanka’s energy security by providing a more reliable and efficient method for importing petroleum products.