• Indo-Lanka Accord, UNP agreements in 2003 and 2017 bound India to tank farm
• Struggling to secure foreign currency for fuel purchase, warns situation worsening
• Went before SC on Yugadanavi deal for people and country at risk of being sacked
• Charges US now gets opportunity to bend SL to its will via New Fortress Energy deal

  By Marianne David Uninterrupted fuel supply has been ensured thus far despite increasing challenges, asserted Energy Minister Udaya Gammanpila, admitting however that the situation was now reaching “near impossible” levels.  In an interview with The Sunday Morning, Gammanpila said Sri Lanka needed $ 400 million a month to meet its fuel bill, with the struggle to find foreign currency to purchase petrol and diesel worsening by the day. “Frankly, day by day I now feel that the situation is getting near impossible. The rest of the month of January will be very challenging,” he revealed. Hailing the Trinco Oil Tank Farm Joint Venture (JV) with India, the Minister listed its benefits for the country while admitting that he would have preferred to have the entire tank farm in Sri Lanka’s possession, but that it was bound by agreements signed by previous governments. Meanwhile, condemning the Yugadanavi Power Plant agreement with US-based New Fortress Energy Inc., the Minister said: “The Sri Lankan Government has agreed to offer the supply of Liquefied Natural Gas (LNG) to our power plants to New Fortress Energy forever. Whoever comes to Sri Lanka as a potential investor to mine our petroleum resources will not have the opportunity to sell their product in Sri Lanka.”  He also raised questions with regard to tender procedure being ignored, terming it a significant deviation from the set procedure for good governance. “The Government suddenly decided to offer the project to a company that never participated in the tender procedure. This is the good governance that we boast about. This is the first time in Sri Lankan history that we have given a project to a company which has not participated in the tender procedure,” he charged. Gammanpila said he – along with his Cabinet colleagues – decided to go to Court over the Yugadanavi agreement knowing full well the risk of going against the Government. Ministers Vasudeva Nanayakkara, Wimal Weerawansa, and Gammanpila went before the Supreme Court in November 2021 against the Government’s decision to transfer 40% of the Kerawalapitiya Yugadanavi Power Plant to US-based New Fortress Energy Inc., with the case now ongoing. “The three of us discussed at length before making this decision. We know we are at a risk of being sacked at any time and we are ready to face it,” he asserted, adding that he was confident the Supreme Court would ensure “justice to this nation”. Following are excerpts of the interview: Given the difficulties in securing fuel shipments due to dollar shortages and the continuing threat of a fuel crisis, could you outline what steps are being taken to resolve these urgent issues? The top brass of the Opposition have been predicting an imminent fuel shortage since last June, but for the last seven months – despite great difficulties – we have managed to ensure uninterrupted fuel supply.  I do admit that the situation is increasingly challenging – this task is tedious and difficult – but so far we have managed to ensure an uninterrupted fuel supply. Frankly, day by day I now feel that the situation is getting near impossible. The rest of the month of January will be very challenging.  We are seeking two credit lines. I must thankfully acknowledge the support given by PetroChina with six months of credit for the shipments purchased from them. Despite having a six-month credit line, we were not able to open Letters of Credit (LCs) for those shipments. Sometimes our ship is at Colombo Port but we are still struggling to open LCs for the cargo. We need $ 400 million a month to meet our fuel bill – around 40% of our export income. On the other hand, most of the export income doesn’t come through official channels. They are being used by importers and other people to send money out; not here but outside the country.  So far we have ensured the uninterrupted supply of fuel and I have assured the country that if there is going to be a fuel shortage, before anyone else I myself will tell the nation that we are going to face such a situation. The situation is really difficult but so far we have been able to manage it. What is the impact these problems are having on power generation? Hydropower’s contribution to national power generation until end December was around 55-60%. Usually January to April is the dry season for our wet zone. As a result, hydropower generation is drastically dropping at this moment. Usually we replace it with diesel and furnace oil power plants. We have sufficient stocks for another 20 days [from 13 January] and we have to open LCs for importing diesel and furnace oil for power plants.  I am struggling to find foreign currency for the retail requirement of petrol and diesel, so I can’t take on the burden of finding dollars for the Ceylon Electricity Board (CEB) as well. I have requested Power Minister Gamini Lokuge as well as the CEB to procure dollars and I will provide the oil required by them. This is the arrangement, and they have agreed. The first LC will be opened next week. Whether they are in a position to procure dollars will be tested in the next week. How will the Trinco Oil Tank Farm Joint Venture (JV) with India help develop Sri Lanka’s energy sector? We have 99 tanks with a capacity of 10,000 Metric Tonnes (MT) each built in the 1920s, nearly 100 years ago. These tanks were subject to decay for several decades. Since they were in Indian possession, we were not in a position to touch them. There was an unsuccessful attempt in December 2016, when our Ceylon Petroleum Corporation (CPC) employees were detained by the Indian Oil Corporation (IOC) employees. A very unpleasant incident took place at that time. We didn’t have access to those tanks. Having such a huge asset in Trincomalee, we were struggling to build new tanks in Colombo – mainly in Kolonnawa and Muthurajawela, and Sapugaskanda, of course.  The first advantage is that the CPC will receive 24 tanks for its use. Therefore CPC will be able to distribute petroleum products to areas such as the Northern, Eastern and North Central Provinces and Monaragala and Kurunegala from Trincomalee, instead of from Colombo. Because of this change, we can save at least Rs. 1 billion per year. Secondly, 61 tanks will be developed as a JV. As a result, we can use these tanks for so many purposes to earn foreign currency. Those tanks will not be used for any local requirement, but for international requirements.  For example, firstly, we can rent these tanks to governments which want to maintain higher reserves to ensure their energy security. Usually we have fuel stocks only for several days, but ideally a country should maintain three months of stocks to ensure energy security. Secondly, there are investors who purchase petroleum products when the prices are lower, store somewhere, and sell when prices are higher. Just like the share market, the petroleum market also fluctuates heavily, so people play in the market as an investment. Those investors need storage facilities and we can rent these tanks to them. Thirdly, we can rent these tanks for storing any edible oil and bio gas. Sri Lanka has a huge potential for hydrogen, especially green hydrogen, which will be the future energy instead of petroleum products within the next 30 to 40 years. The entire world will be using hydrogen to run their vehicles. We can use these tanks to store hydrogen, so there is huge potential.  Trincomalee is a sunny district; we can use this huge area as a solar power plant to generate electricity. We can also use it as one of historical value. Once it was the largest tank farm in the world and the 91st tank was destroyed by the Japanese during the Second World War. This new JV, Trincomalee Petroleum Terminal Ltd., will first have a feasibility study and thereafter they will prepare a business plan; those areas will be considered by the management of the company when they prepare their business plans. What was the reason to form a new company – Trincomalee Petroleum Terminal Ltd. – with CPC and Lanka Indian Oil Company (LIOC) when the two companies already have a joint institution – Ceylon Petroleum Storage Terminal Ltd. (CPSTL)? Firstly, that company’s mandate is different; its mandate is to store the products and distribute throughout Sri Lanka and its focus is local business. This tank farm company will exclusively maintain the tank farm. Secondly, in the CPSTL, CPC holds two-thirds against one-third of LIOC, but here it is 59:41%. Why did Sri Lanka opt to extend the lease to LIOC when it could have retaken the tanks after LIOC’s initial lease term? Firstly, in 1897, President J.R. Jayewardene agreed with India to develop and operate this tank farm jointly with India, so we have a bilateral obligation with India to develop jointly. Secondly, Prime Minister Ranil Wickremesinghe on 7 February 2003 leased out these tanks to India for a period of 35 years. That is how they came into possession of these tanks. Thirdly, in 2017, the Malik Samarawickrama-Sushma Swaraj MoU agreed with India to lease out the entire tank farm of 99 tanks to LIOC for a period of 99 years. Sri Lanka was under obligation to India in respect of this tank farm through these three agreements. I had to negotiate with India in this backdrop. If I could ignore these agreements, I would have taken the entire tank farm into Sri Lanka’s possession; I would love to do that. Unfortunately, there are three agreements signed by previous governments and I am bound by them. So Sri Lanka is not able to even look at any other country/investor for this? No, it is not. But we have to look at the present agreement in the backdrop of the previous agreement. Previously the entire tank farm was with India. We couldn’t do anything. Now at least we can use 24 tanks for CPC’s benefit; 61 tanks will be developed to earn much-needed foreign currency for the country. But there are still restrictions.  I would love to have a free, independent business venture instead of having different conditions being imposed, but unfortunately because of previous agreements signed by previous governments, my hands are tied. What are your key reasons for rejecting the Yugadanavi Power Plant agreement with US-based New Fortress Energy Inc.? As the Minister of Energy, I presented a dream to this nation. I told our people that we have gas and oil in our country. I further explained that in the Mannar Basin alone, we have petroleum resources worth $ 300 billion. Our entire national foreign debt amounts to $ 47 billion.  We have a huge foreign currency crisis; I presented a solution and people were thrilled with that. Unfortunately, in this agreement, the Sri Lankan Government has agreed to offer the supply of Liquefied Natural Gas (LNG) to our power plants to New Fortress Energy forever. Indefinitely. As a result, whoever comes to Sri Lanka as a potential investor to mine our petroleum resources will not have the opportunity to sell their product in Sri Lanka.  Gas is not like oil. It is very difficult to transport and store; ideally it should be used soon after being produced. Through pipelines it is taken to power stations or fuel pumping stations for vehicles – a lot of countries use LNG as their transport fuel – and then domestic use, industrial use, and so on. But here, we deny the biggest bulk market to the potential investor; by doing so we discourage potential investors from engaging in oil exploration in Sri Lanka. Secondly, in the recent past the US tried to use economic tools – such as economic embargoes – to force Sri Lanka to do certain things that it wanted. For instance, it wanted to introduce a federal constitution to Sri Lanka. When we said no, it brought resolutions at the United Nations Human Rights Council (UNHRC) with the threat of economic embargoes.  Now, New Fortress Energy is a US company, so the US gets a new opportunity to force Sri Lanka to do certain things it wants, with the threat of sending the country into total darkness by denying the LNG supply to Sri Lanka. Those are the main reasons, but there are supplementary reasons. The sale of 40% of Yugadanavi to New Fortress is a very shady deal. In this transaction, the gas supplier is New Fortress Energy and Yugadanavi is one of the gas purchasers. With a 40% share, they are going to take the management interest of that company, so in the end both the buyer and the seller, when they meet to negotiate prices and quantity and so on, are under control of New Fortress Energy. From the supplier’s side, 100% is owned by New Fortress; from the purchaser’s side it is only 40%. Then, obviously, all decisions will be made in favour of the supplier. This is against our national interest. Those are the reasons we are against the New Fortress Energy deal.  There is another very important thing. This is a good governance issue as well. The Government floated a tender to build infrastructure for LNG supply by way of a Floating Storage and Regasification Unit (FSRU) and pipeline. When there is a company which has gone through this tender procedure and secured the project for installation of the FSRU and the pipeline, the Government suddenly decided to offer the project to a company that never participated in the tender procedure. Is this the good governance that we boast about? This is the first time in Sri Lankan history that we have given a project to a company which has not participated in the tender procedure. This is a significant deviation from the set procedure for good governance. Those are the issues over which we decided to oppose this deal. What will your next step be if the Supreme Court dismisses your application? Well, I listened to the submissions of the counsels of both sides and I am confident that the Supreme Court will bring justice to this nation. Why was there so much secrecy surrounding the agreement and were you absolutely in the dark until it was signed? In July 2021, a Cabinet paper was presented at the very last minute and both Minister Dullas Alahapperuma and I requested that it be postponed by one more week to submit our observations, but that opportunity was denied and we were given only 24 hours to do so. But those observations were never discussed at the Cabinet meeting. Then again in September, it was a Zoom meeting and we never received a Cabinet paper, so there was no discussion. But when we received the Cabinet minutes, it said it was discussed at length and approved and that the Cabinet decided to consider the minute was also approved, so there will be no opportunity for the ministers to discuss the issue again at the next meeting. As a result we did not see the Cabinet paper before placing the signatures; thereafter of course it was tabled at Cabinet and when we perused the document we found a lot of lapses. We sought another meeting and we were denied that meeting as well; then we decided to call a public meeting in Pita Kotte and tell the public about this agreement. Thereafter of course we decided to tell the truth to the Supreme Court as well.  Some members of the Government have called for you to be sacked given your position on the Yugadanavi deal. What is your response? We know the risk of going against the Government, being Cabinet Ministers. The three of us [Ministers Vasudeva Nanayakkara, Wimal Weerawansa and Gammanpila] discussed at length before taking this decision. We are fully aware of the risks; we assessed the risks and decided to take a calculated risk for the benefit of the people, in the name of good governance, in the name of securing our country. We know we are at a risk of being sacked at any time and we are ready to face it.