Harsha stresses on need to improve Trinco Oil Tank Farm: A response

This is in reference to the article under the aforementioned title written by Dr. Harsha De Silva in Daily FT of 24 April via a guest column. 

His simplistic interpretations of the issue related to the Trincomalee Tank Farm leaves a lot of room for conjecture and puts the spotlight on the Ceylon Petroleum Corporation (CPC) in a bad way. 

Sri Lanka’s real problem lies in educated people just skimming the issue without an in-depth analysis. Let’s keep divisive politics aside and talk facts. 

The fundamental issue with Trinco is that the whole deal is an outcome of the Indo-Lanka Accord of 1987 and India’s geopolitical concerns which SL as a neighbour will have to respect. Hence, we Sri Lankans have to realise that India will always be part of the solution where Trinco Tank Farms are concerned. 

Having said that, has India ever been serious about developing the upper tank farm (i.e. 84 tanks)? Can Dr. Harsha please show even one instance since 2003 where they have shown a serious inclination to develop the tank farm? They were always prompted into some sort of action whenever CPC started showing some interest. 

As Dr. Harsha may well be aware, it is in the CPC’s interest as the national oil company of Sri Lanka to at least use some of the tanks given the precarious position with respect to the countries strategic oil stocks.

As Dr. Harsha himself states, CPC is a cash-strapped SOE running at a loss (why CPC is at a loss is another topic that needs to be analysed in detail). Then, isn’t it perfectly logical and economically sensible that at least some of the tanks available within the sovereign territory of Sri Lanka be refurbished and put to good use in order to meet CPC’s national obligation in securing the nation’s energy interests? This will be cheaper than fabricating new tanks at an alternative location. 

Furthermore, one has to consider the time taken for the HSEIA process and the social costs involved in going for a brand new location and new project with new JV Partners. Hence, CPC’s premise that refurbishing and commissioning at least some of the tanks within the Trinco Tank Farm makes perfect economic sense. 

It is my understanding (arguably) that what CPC and the unions oppose is not the involvement of India as a JV partner but the absurd condition in the MoU of 2007 which requires CPC to pay a lease rental on the tanks. CPC is already paying a throughput charge to CPSTL for using the Common User Facility (CUF) at the Kolonnawa Terminal; one-third of the shares of CPSTL is owned by LIOC. Please correct me if I am wrong. 

Dr. Harsha’s allegation that we are unable as “a nation to understand trade and markets and appreciate simple economic logic” is an insult to the intelligence of the many professionals who keep the wheels turning in Sri Lanka’s petroleum sector under extremely trying conditions. 

It would be in Dr. Harsha’s best interest to go through the Auditor General’s report of 2016 (i.e. CPC’s Performance for 2015) and read through his recommendations. Furthermore, I hope he rereads the COPE Committee Reports of 2016 and 2017. 

CPC conducted an appraisal of the Trinco Tanks in 2016 in compliance with the recommendations from the COPE. The Engineering Team from CPC have given a detailed report on the usability of the tanks as well as the cost implications. Further attempts to implement the recommendations of the report by CPC in late 2016 were later met by some very strange political developments which stifled any further development of the Tank Farm. Dr. Harsha may be privy to the farce that ensued.

Please don’t use the CPC as a scapegoat whenever someone wakes up to the realities of the global oil and gas industry and Sri Lanka’s shortcomings. As Dr. Harsha has rightly said (and this is the only point I can agree with him), think of alternatives other than the Trincomalee Tank Farm and India. 

If India wants SL out of the Trincomalee Tank Farm then so be it; you can’t abrogate the Indo-Lanka Accord. How about negotiating with an oil major like Shell or BP or an independent oil and gas operator from Japan? At the rate current storage premiums are going even traders will be interested if oil majors are not. 

Why not think of KKS, Sampur or Hambantota as viable locations? Talk to the Chinese or Japanese if India is not interested. Sri Lanka has a golden opportunity to be the Fujairah of South Asia even if we can’t emulate Jurong. Let’s stop sniping at each other for cheap political gains. I am sure Dr. Harsha as an educated gentleman understands this. 

There will always be a give and take when dealing with global energy giants. They won’t invest because we are the ‘Miracle of Asia’ or ‘Teardrop of the Indian Ocean,’ but because it is in their business and strategic interest. I hope we Sri Lankans too can develop the same quality of thought when it comes to national and strategic interests. 

I hope FT gets the valuable opinions of real economists like Prof. Lalithasiri Gunaruwan and Dr. Tilak Siymabalapitya who are capable of in-depth analysis of Sri Lanka’s energy industry. Sri Lanka needs a unified approach in achieving energy security and resilience which cannot be achieved without the political maturity of our national leaders, policymakers, administrators and unions. 

K.G.V.K. De Silva

Galle

(Former Employee of the Ceylon Petroleum Corporation)