Govt. goes for 4 long-term fuel contracts

• 3 deals go to PetroChina International Ltd., Singapore and the other to Swiss Singapore Overseas Enterprises Ltd., for supply until 31 January next year

Cabinet this week approved four long-term contracts for the procurement of fuel within eight months from 1 June to 31 January 2022.

Of the total four long-term contracts, three were awarded to PetroChina International Ltd., Singapore and the balance to Swiss Singapore Overseas Enterprises Ltd. The four long-term contracts were to import of 2,700,000+10-5% barrels of Petrol (92 Unl) to Swiss Singapore Overseas Enterprises Singapore; import of 1,120,000+10/-5% barrels of Diesel (maximum percentage of Sulphur 0.05) to be unloaded by Muthurajawela SPM to PetroChina International Singapore; import of 1,341,000+10/-5% barrels of Petrol (92 Unl) and 459,000+10/5% barrels of Petrol (95 Unl) to PetroChina International Singapore; and import of 1,200,000+10/5% barrels of Diesel (maximum percentage of sulphur 0.05) to be unloaded across Colombo Dolphin Tanker Berth (DTB) and Muthurajawela SPM to PetroChina International Singapore.

The proposal submitted by the Power Minister to award the four long-term contracts was on the recommendations of the Special Standing Procurement Committee appointed by the Cabinet. 

Last month the Cabinet Sub-Committee chaired by Prime Minister Mahinda Rajapaksa discussed the rapid increase in fuel prices in the world market compared to 2019 and 2020.

The meeting was the third by the Cabinet Sub-Committee appointed on the Reimbursement of Kerosene Subsidy, Restructuring of Ports and Airports Development Tax on Crude Oil and the financial problems of the Ceylon Petroleum Corporation (CPC).

According to the Central Bank, the CPC’s import price (CIF) in January was $ 57.65 per barrel and in February it was $ 64.07. The price paid in July to November 2020 averaged between a low of $ 41.77 per barrel and high of $ 47.74 per barrel. In April it was $ 19.56 and May $ 25.44.

Futures prices of Brent had risen to $ 65 per barrel in April from $ 55 in January this year.

It was revealed at this meeting that a number of State institutions, including the Ceylon Electricity Board, are still repaying loans to the Ceylon Petroleum Corporation for 2019.

It was disclosed that under the fuel price stabilisation with the intervention of the Ministry of Finance last year, the CPC had been paid Rs. 50 billion, but that another Rs. 79 billion was yet to be received.

Accordingly, the daily loss incurred by the CPC has increased significantly.

Cabinet last week approved amendments to the CPC Act No. 28 of 1961, renewing its efforts to expand refinery capacity and boost efforts to build new refinery in the coming years.

The amendments to the existing Act are hoped to give teeth to the upcoming Bill, which will allow the implementation of a build, operate and transfer (BOT) basis refinery with an output of 100,000 barrels per day (b/d).

“To increase our current output of 38,000 b/d to 45,000 b/d, and to build a new refinery with a capacity of 100,000 b/d, we needed to revise certain provisions of the existing CPC Act,” Co-Cabinet Spokesman Gammanpila told journalists last week.

He said that with CPC holding a monopoly in the refinery industry, and for the proposed new refinery to be built on a BOT basis, amendments to the existing legislation were critical.

Currently, the Sapugaskanda refinery – the larger of the country’s two refining sites – meets only 25% of local demand for refined petroleum products, requiring the remaining 75% be imported.