CPC enters LPG business as third competitor

• Cabinet clears to establish new LPG firm affiliated to CPC

The State-run Ceylon Petroleum Corporation (CPC) will enter the Liquefied Petroleum Gas (LPG) market utilising by-products from its refinery.

A proposal to this effect submitted by Energy Minister Udaya Gammanpila was approved by the Cabinet of Ministers this week.

“CPC has now recognised the importance of the LPG market and will be third supplier apart from Litro and LAUGFS,” Cabinet Co-Spokesman and Plantation Industries Minister Dr. Ramesh Pathirana said at the post-Cabinet meeting media briefing yesterday.

The Sapugaskanda refinery owned by the CPC produces 70-90 tons of LP gas per day, which is 5% of the country›s demand. A feasibility study is being carried out to set up a new refinery with a capacity of 10,000 bpd and plans are being drawn up to expedite the implementation of these development projects, the Government said.

With temporary suspension of imports and distribution of private-run LAUGFS, the market saw shortages of LPG which ran into months. LAUGFS is back in the market with a higher price as opposed to Litro. 

In the meantime, a Special Purpose Vehicle (SPV) has been formed by the Government to strengthen the procurement of LPG at competitive prices. 

Last week, State Minister of Cooperative Services, Marketing Development and Consumer Protection Lasantha Alagiyawanna said the formation of the new firm would enable the Government to provide LPG at a cheaper price, which is also the objective of the Government.

“Through the implementation of this joint venture, it is possible to procure LPG Rs. 125-130 cheaper than the prices at present,” he said, adding that the above price benefit could be possible after evaluating and amending the inefficiencies at both LPG companies at present.

Pro-Litro activists have vehemently opposed the new venture, saying it would have disastrous financial impact. Instead they have suggested that the Government should take over or lease the LAUGFS LPG storage terminal in Hambantota.  

In a bid to resolve the shortage crisis, in August the Energy Ministry said the Government had decided to establish a new firm affiliated to the State-run CPC (https://www.ft.lk/front-page/Cabinet-nod-to-establish-new-LP-gas-company-affiliated-to-CPC/44-721650).

In May, the Cabinet decided to call for international bids for a 100,000 barrels per day (bpd) oil refinery on a Build-Operate-Transfer (BOT) basis and to amend the Ceylon Petroleum Corporation Act No. 28 of 1961, to end the State refining monopoly.

The Energy Ministry in a statement said the existing 38,000 bpd refinery by CPC would be expanded to 45,000 bpd through the proposed refinery project. The feasibility study in this regard is expected to be completed this month.