When the nationalization is completed, before June, three companies in the oil sector will begin distributing in 450 service stations out of the 1,142 distributed on the island. China’s Sinopec, Australia’s United Petroleum and RM Parks Inc. of the US are expected to sign within a few days. The companies will be able to import, store and distribute black gold-related products for the next 20 years.
Colombo () – Three foreign companies are preparing to return to the Sri Lankan oil market after the nationalization process of the crude oil sector that Colombo implemented in the early 1960s, with the sole exception of the Indian Oil Corporation (IOC). which operated until 2003. In this line, the government has recently closed the agreements for the sale of fuel, logistics and management policies, including the calendar for the start of operations, in collaboration with the main local operator in the sector, Ceylon Petroleum Corporation (CPC).
The Council of Ministers last month approved a proposal to grant licenses to three foreign oil companies, which will be able to sell crude on the domestic retail market. These are the Chinese Sinopec, the Australian United Petroleum and the American Rm Parks Inc., which will operate in collaboration with the London-based Shell Plc. Companies will be able to import, store and distribute black gold related products for the next 20 years.
Energy Minister Kanchana Wijesekera reported that the signing of the “most important agreements” will take place in mid-May and operations may begin “within 45 days after signing.” Ministry officials explained to that “one year after the crisis” that forced citizens to wait in long lines at service stations, foreign companies will enter the domestic market that “will be able to sell fuel at a lower price” than the one adopted today by the state company. The date should be announced soon.
Chinese Sinopec is closely watching the oil (and energy) market in Sri Lanka, and even a group of company executives are on the island these days to finalize agreements for the sale of crude oil. As agreed, each company should be able to supply 150 service stations controlled by Ceylon Petroleum Corporation. Currently there are 1,142 stations under the jurisdiction of the CPC; however, the company only owns 234, while another 450 of the remaining 908 are owned by private distributors and should be assigned to foreign companies.
Nishantha Gunaratna and Dasun Sudasinghe, Sri Lankan economic specialists, say that the CPC is a “corrupt organization that generates losses and is a burden on the national economy.” That is why the decision to privatize seems to be the “only possible solution”, as can be deduced from the considerations of public opinion. Other experts in the sector affirm that, with the entry of three foreign companies, it is increasingly evident that the presence of a “state regulator” is vital to obtain “the expected positive results.” The former Minister of Energy, Patalee Champika Ranawake, considers that “the government and the regulatory entity should prevent the formation of energy cartels”, because with the liberalization of the fuel market “the logic of competition should prevail” with the control of a independent body, otherwise it will be another “disastrous experience” that would be added to the current one of nationalization.
