Govt. mulls removal of strategic oil farm from LIOC

• Admits talks are ongoing, wants it as part of a CPC expansion project

By Uditha Jayasinghe  

The Government is deliberating on removing a strategically important oil farm from an Indian petroleum company, which could have deep effects on international investments in the island, a top official said here on Thursday.

Government Spokesman and Media Minsiter Keheliya Rambukwella confirmed that discussions were underway to determine whether or not the Trincomalee Oil Tank Farm in the Eastern Province of the country should be taken from Lanka Indian Oil Company (LIOC), which is a subsidiary of the Fortune 500 Indian Oil Company (IOC).

The tank farm consisting of 99 tanks is located on an 850-acre block of land. Each of the tanks has a holding capacity of 12,100 kilolitres of oil. It is located near the Trincomalee Harbour, which is strategically important to India because of its proximity to the subcontinent as well as being one of the largest tank farms between the Middle East and Singapore.

The tank farm connects to the Trincomalee Harbour, which is the fifth largest all-weather, non-tidal natural harbour in the world, with a 56 km shoreline, making this tank farm most effective for fuel receipt, storage and supply.

The tank farm was formerly under State-run Ceylon Petroleum Cooperation (CPC) before being handed over to LIOC. Currently only 15 tanks are operational.

Rambukwella noted that the takeover would only take place if LIOC failed to utilise the tank farm competently.

“The tank farm was given on an agreement and returning it to the Government will be done legally. However, the Government has an expansion and development plan for the CPC so if they (LIOC) are not using it, then we may take it over. Discussions are ongoing.”

Reports have indicated that advice has already been sought from the Attorney General’s Department on the legal binding of the contract that was signed during the previous Government.

Last week the Commercial High Court in Colombo seized a Vietnamese ship carrying over 4,500 metric tons of allegedly substandard oil for LIOC. The company has denied the charges.

In 2011 the Sri Lankan Government passed a controversial document in Parliament to nationalise 37 enterprises titled the Revival of Underperforming Enterprises and Underutilised Assets Bill. Critics warned that such a step would undermine confidence of foreign investors but their concerns were left unheeded.