Friday Sep 20, 2024
Friday Sep 20, 2024
Friday, 25 July 2014 00:00 - - {{hitsCtrl.values.hits}}
Q: What are the latest developments in the petroleum sector?
A: After I took over, I noticed several shortcomings. Mainly we didn’t use our storage capacity to the maximum. Secondly, we have not gone into long-term contracts of procuring petroleum products and crude. Thirdly, we have not developed our laboratory facilities. On the other hand we have not enhanced the quality of petroleum products to Sri Lanka. I also noticed that we have to invest heavily on infrastructure development such as refinery, pipelines, storage and also buoys that are used to pump petrol and diesel to Sri Lanka.
However, these are not very easy targets. The first two are quite easy, but the others depend on how much capital the Government has and what the priorities of the day are. We have to always consult the Government with regard to that.
We are now using maximum of our storage facilities and also we have upgraded the quality of our fuel to a certain extent. We have now entered into long-term contracts and by doing so we have been able to reduce the premiums that have been paying. We have come down $ 1.40 for a barrel from the premium we paid earlier. This is a big saving to the country.
With regard to other infrastructure development, the Government in the last Budget earmarked these areas as priority and thrust investment opportunities for Sri Lanka. Some may think this is an easy task but it is not. Actually these things involve a lot of money. We need nearly three billion dollars or more to upgrade all the facilities. Therefore we will have to find out what the most important areas are.
We are now in the process of finding a suitable applicant for the pipeline from Kolonnawa to the Harbour, which have been discussed quite often in the media. This has given a lot of trouble to us earlier. Actually the technical committee will most probably be able to meet and resolve it very soon. It is now in the middle stages. We have received a number of requests from different countries and we will find out what the best option is. Once they submit their findings, I might be able to put it before the Cabinet.
Q: Upgrading refinery facilities has been at discussion stage for a long period of time. Don’t you feel it is time to initiate the work?
A: They will have to do it at least within the next three months. If we can enter into an initial agreement with any of the companies, we need another five years to finish it. This is critical. People say our present refinery is dilapidated, but it is no so. It is working well but unfortunately the technology is old. Every two years we need to repair it. For the last 40 years it has given us good results. But the technology is now outdated. That is why we have to go for a completely brand new option.
Q: What is the loss incurred by the CPC?
A: In 2012 our loss was Rs. 9,700 million. I have been able to cut down it in 2013 to nearly 7,000 million rupees. This year we can run with the operating profit and that is our intention. We are working on that. We have been selling oil at a concessionary price since 2007 because during that period the market was fluctuating heavily. We could not bring up prices to that level. Therefore we have incurred big losses for the corporation. Now we are slowly repaying those loans. I have been able to discuss with CEB, SriLankan Airlines and other State organisations to issue fuel on credit basis. We have been able to recover their outstanding amounts from them. Therefore our balance sheets are now good.
Q: Have you completed repairs on the damaged buoy hose?
A: What actually happened was that initially we used to buy these hoses from Japan. In 2010 that company stopped producing them. At that time I was not the Minister of Petroleum. Then the CPC was compelled to find an alternative. According to the CPC officers, they went through a tender procedure and a company in Italy was picked to supply hose for the buoy. Since then there were breakdowns. We have faced a lot of difficulty due to these hoses that are not up to the expected standards. We decided the option would be to go for another company. We have selected Dunlop and Yokohama. We have invited both the parties. After an initial discussion we have awarded a contract to design and build a buoy hose by Dunlop England. They will deliver it very soon; most probably within the next few weeks.
Q: How much will it cost to purchase new buoy hose?
A: I am unable to give you an exact figure. But the cost will be high. My advisers and engineers said that they prefer this particular hose because it will work better than what we are using now.
"In 2012 our loss was Rs. 9,700 million. I have been able to cut down it in 2013 to nearly 7,000 million rupees. This year we can run with the operating profit and that is our intention. We are working on that
The UNP Government during 2001/02 did immense damage to the CPC. They have given our lubricant market and our lubricant mixing facility to another company. They completely gave away our bunker business. The UNP that chopped our wings now wants us to fly. They have created a storage facility and given one-third of it to the Indian Oil Company. They have given 99 tanks in Trincomalee on a 35-year lease without keeping at least half of it for the Government. Suddenly my friend Ranil Wickremesinghe comes out and says CPC is incurring losses
Our loss from one litre of kerosene oil is Rs. 23. Diesel we are selling at a loss but petrol there is a small profit. One has to understand the volume. We are selling around 5,000 metric tons of diesel per day compared to 2,000 metric tons of petrol"
Q: What impact have the recent breakdowns had on the petroleum business?
A: There is a very big impact on the market. We have gone into different scenarios where crude oil is concerned. We cannot buy Iranian oil anymore. After very careful consideration and testing, we have been able to find a solution; we are now using Merban from Abu Dhabi and Oman Lite from Oman. It is a combination; we have to mix it and use.
When you secure crude from Abu Dhabi; it is a very difficult process. When we enter into a contract with them, they will never allow us to delay it. The contract has to be performed. We can only repair these buoy hoses during the months of November up to April when the sea is calm. Since this is the monsoon period, the sea is very rough. We have never, ever undertaken an expedition of this nature.
There are crude ships waiting. We have unloaded two, but there is another one to unload. We have started the refinery. For the time-being the problem has been solved. But it is a difficult situation we have to face. On one side there is heavy criticism from various parties. But this is an unavoidable situation and therefore we have to face it. Within a very short period of time I managed to work with our officials and they have done their best to put everything back to the same position.
The Muthurajawela buoy was also damaged but that has been repaired now. This was for refined petroleum products. This is a bad time for us. There is lot of criticism from all sides. But these are unavoidable.
Q: Is it true that $ 3,000 per ship is paid as demurrage on a daily basis?
A: That is not true. All these figures are incorrect. We are still negotiating with the companies. In the contract there is a clause that describes incidents of this nature. We have insured our cargo against any such situation. We have not yet figured out the amount. The figures published in the papers are not true.
Yes we will have to pay a certain amount as demurrage. But we have not yet figured out. But the value of the crude is much more. It is about $ 350 million for the whole lot of crude that came and waited to be unloaded. We cannot resell that. If we resell it will come to $ 20 per ton. That is a huge loss to us. Therefore we have to pay demurrage. But according to agreements we are discussing it with charter party as well as suppliers. They are also very helpful to us.
What is most important is that if we sell those cargos, it would incur a much bigger loss to us than the demurrage that we will have to pay. I have started investigations with regard to the buoy hose. We will send a notice to the manufacturing company seeking legal remedy.
Q: Are you saying no demurrage has been paid so far?
A: We have not paid a cent.
Q: It is true that there are 290,000 tons of unloaded crude oil?
A: We have unloaded two ships; each consists of 90,000 metric tons. On Tuesday I was informed there is only one ship remaining to be unloaded. Storage wise we have the capacity. There is nothing to worry about. We have started using crude, therefore according to that volume we can start unloading the remaining crude.
Q: What is the storage capacity for crude and refined crude?
A: I do not have the figures. Usually we have around 300,000 metric tons of crude. Refined crude; petrol is 75,000 metric tons, diesel 130,000 metric tons.
Q: The Opposition Leader has claimed every Sri Lankan is indebted Rs. 12,000 rupees due to the losses of the CPC. Your comments?
A: It is not true. We have incurred a loss but the CPC itself is paying it. We have a public duty. If we are allowed to sell according to market prices, there won’t be any loss. We issue fuel to CEB to produce electricity. We are subsidising the consumer. We have to raise and find money from the banks to bridge the gap. I have designed a scheme where certain losses to be minimised. By minimising the losses we are also able to make profits. There won’t be any payment by the public. Therefore the Opposition Leader’s argument is incorrect.
The UNP Government during 2001/02 did immense damage to the CPC. They have given our lubricant market and our lubricant mixing facility to another company. Now we have to restart our lubricant business. It is a very profitable venture. They completely gave away our bunker business. That was one of the most profitable businesses. The UNP that chopped our wings now wants us to fly.
They have created a storage facility and given one-third of it to the Indian Oil Company. We have no exclusivity in that. They have given 99 tanks in Trincomalee on a 35-year lease without keeping at least half of it for the Government. If we had those tanks today, we would have stored petrol for the next 50 days. I could have started a business of selling it to the other countries.
Suddenly my friend Ranil Wickremesinghe comes out and says CPC is incurring losses. Who is responsible for this situation? He and his Government are responsible for the losses of the CPC. We only do retail business and we sell less than the market price. How can they expect us to make profits? Earlier we had a fully-fledged Petroleum Corporation where we had other income. But today we have no other income. We have been put to this unfortunate position by the UNP.
Though we have been unduly criticised by trade unions and different people, we are embarking on a good mission to resurrect the petroleum industry in the country. We are trying to add value to it and make it a profitable venture. We have not cut down any benefits enjoyed by the workers. We are not trying to reply to every possible criticism levelled against us by certain trade unions because of their political affiliations.
Q: Wickremesinghe has also said that from 2007 to 2013, the CPC has incurred a loss of 250 billion rupees. Is it true?
A: Actually the loss is roughly that amount. But we are repaying that. We have brought it down. This is totally between the corporation and the bank. The Government is not giving us a cent. Then only one can argue that people’s money is used. We are generating our own funds to repay this amount.
Q: How much money have you repaid so far?
A: We have repaid around 60 to 70 billion rupees during 2013 and 2014.
Q: How much more to be settled?
A: I don’t have the exact figures. But we are reducing that amount slowly but steadily.
Q: What is the loss or profit incurred from one litre of petrol, diesel and kerosene oil?
A: I am not in a position to give the exact figures. Our loss from one litre of kerosene oil is Rs. 23. Diesel we are selling at a loss but petrol there is a small profit. One has to understand the volume. We are selling around 5,000 metric tons of diesel per day compared to 2,000 metric tons of petrol.
Q: What is the CPC’s market share?
A: More than 80%. IOC is not selling kerosene; they are only selling diesel and petrol. We are the market leader because we are looking after the ordinary people who use diesel, petrol and kerosene. We also have to look after bigger consumers such as CEB, SriLankan Airlines and Railways.
Q: How will the recent developments in the petroleum sector affect domestic fuel prices?
A: There won’t be any impact on domestic fuel prices. We have no impact on increasing fuel prices. My initial idea was to strengthen the market and give our consumers a better product at a reasonable price. That is my priority and I am working on that. In addition to that we have to understand that this is an investment-oriented industry. You have to always invest and in the meantime recover that too.
These are things that the consumer has to understand. We are not getting any more from the Government; actually we are paying the Government. Even if we borrow from the banks, we repay them. The Government and the Treasury helped us to bridge the gap a number of times because we have given subsidies to the consumer.
Q: Is it true that there will be a downward domestic fuel price revision before the upcoming election?
A: No, there is no truth in that. If you take refined petrol, the premium has gone up. India and Vietnam were buying from the market at a rate. But we have not got affected because we have entered into long-term contracts. Fuel prices going up have been mitigated by our decision to long-term contracts with our suppliers. There cannot be a trend in prices moving down because there are lots of issues in the Middle East. Even crude prices have gone up. There won’t be any price revision as yet. But we are trying our best to make avenues for the people to get their fuel at a reasonable and competitive price.
Q: A group of UNP Parliamentarians were prevented from entering the Sapugaskanda Refinery although they had obtained prior approval. Why?
A: I don’t know from where they got approval; they never informed me. We are not against them going into installations. But they also have to understand these are very secured environments. Normally we don’t allow anyone to go in. In any refinery in any part of the world, there are restrictions. These are not places where you suddenly go to the gate and say, ‘I want to go in’. It was unfortunate that they were not able to carry out their inspection tour.
Q: But they claim to have obtained permission from the CPC Chairman.
A: I don’t know about that.
Q: What do you think about these inspection tours? Do you believe the Opposition Parliamentarians have the right to engage in such fact-finding missions?
A: If they want to find out about malpractices taking place in State institutions, there are better ways to do it. By just visiting these places, what are they trying to achieve? They can only see the place. They can refer to the documents, annual reports, purchasing orders, agreements… they can do anything and we have no objections. But my theory is that they have to get proper permission. You can’t just let in a bunch of people into an important State institution, especially an institution like the CPC. They may be Parliamentarians but there should be some decorum. These institutions are not there for media shows. These are responsible places.
Q: What are your views about the upcoming elections?
A: Places like Badulla and Monaragala were neglected for a long time. If you visit these areas today, you will see a vast amount of development activities completed by our Government. We have no problem in winning. We will continue to win. We have a very strong organisation. The SLFP has the strongest political organisation. We are highly organised in each and every village.
Q: Although you are confident about winning, don’t you think the Rajapaksa regime is losing its popularity and with the mounting international pressure, religious clashes, breakdown of law and order, rights issues and especially the high cost of living, the Government will have to face tough times ahead?
A: Sri Lanka is a small country. We have gone through a difficult past. We have dealt with 35 years of Tamil Tiger terrorism and the ’71 and ’89 youth insurrections. This is not the first time we have witnessed these sectarian clashes. But these are isolated incidents. The Government is embarking on a very important and a difficult task, ensuring every Sri Lankan lives peacefully and happily in any part of the country.
If you visit Tamil-dominated areas, Muslim-dominated areas or Sinhala-dominated areas, you will see that we have not compromised on development activities. We have provided them all the infrastructure facilities. We have no intention of dividing people. After a war, any country will face this type of situation. We are trying our best to calm the situation and make sure that it will not be a common occurrence in other places.
Meanwhile, my argument is that the President is immensely popular. I don’t see any other person or a common candidate as they say who will be able to challenge him. Hopefully we will have the same kind of popularity if we stand for an election next time.
