Sri Lanka fuel shortage to end on Nov. 9

COLOMBO - 7 November 2017: Sri Lanka's fuel shortage will end on Nov. 9, Petroleum Minister Arjuna Ranatunga said on Monday, as state-run oil retailer Ceylon Petroleum Corporation (CPC) and Lanka IOC traded blame charges over the shortage.

Thousands of Sri Lankan motorists formed long queues for fuel for a fourth straight day on Monday after CPC limited the supply last week following a delayed fuel shipment and rejection of another due to the wrong specifications.

Ranatunga said the next shipment of 40,000 MT of gasoline is expected on Wednesday and the shortage could be addressed on Thursday after immediate distribution.

"Once the shipment comes, the situation will return to normal," he told reporters in Colombo.

The Nov. 8 shipment was originally expected to arrive last Thursday, but officials did not give any reason for the delay.

In a separate statement, the petroleum ministry said there was a request by LIOC, a subsidiary of Indian Oil Corporation to accept an initially rejected 35,000 MT cargo after filtration, but authorities did not accept it, "in the interest of the Sri Lankan consumers".

CPC trade unions, which are not in favour of LIOC operations in Sri Lanka, said the Indian firm has forced CPC to accept the rejected shipment while keeping the vessel on the eastern coast.

LIOC, however, said a replacement cargo would have taken 25-30 days and its supplier offered to remove the particles via filtration process to enable expedited delivery by Nov. 3-4.

"For reasons unknown to us, this proposal was not acceptable to CPC officials. Allegations of LIOC pressurised CPC to accept the original parcel without correction are totally false," it said.

The Indian firm also said the delay in CPC's shipment has "led to shortages of petrol across the country, particularly given that CPC caters to 84 percent of the Sri Lankan market".

The petroleum ministry also said there was an interruption to the CPC's Sapugaskanda refinery operations due to electrical failure, which resulted in a production loss for three days.

Trade unions at CPC have blamed a government deal to handover 99 oil tanks in the island's eastern port city to LIOC for a lack of storage as the Indian firm is utilising only 15 tanks and not allowing the CPC to use them for storage.

The current shortage also comes a month after LIOC said it would increase petrol prices because it was incurring a loss, though CPC said it would not raise prices. LIOC has not increased the price yet. Both have said they have been incurring losses on petrol sales.

Sri Lanka has agreed with India to jointly develop and operate all oil tanks in the oil storage facility located in Trincomalee near the world's second deepest natural harbour.

IOC has agreed to build a second refinery with a capacity of at least 100,000 barrels per day (bpd) in Sri Lanka, while Modi in 2015 pledged to establish a petroleum hub in Trincomalee.

A Lanka IOC official had told Reuters that due to trade union pressure CPC would be allowed to use 10 of the 84 tanks earmarked for the joint venture between the two companies.