CPC and LIOC agree to Trincomalee Tank Farm business plan
The Sri Lankan Government is going ahead with a business plan to develop the Trincomalee Oil Tank Farm jointly by the Ceylon Petroleum Corporation (CPC) and Lanka IOC, Petroleum Resources Development Minister Chandima Weerakkody said.
Despite disputes on the lease agreement of the tank farm tainted with legal issues and protests of trade unions, a new venture has been proposed between CPC and Lanka IOC under a business plan devised by Ernst &Young.
The Indian government is agreeable to the plan and Lanka IOC has been informed accordingly, he told the Business Times adding that 30 out of 84 tanks would be developed during the first phase of the proposed venture.
Minister Weerakkody noted that the Cabinet of Ministers had approved a Cabinet paper presented by him on April 28, 2016 on “Rehabilitation and development of upper oil tank farm (UTF) by CPC” to hand over the title and the ownership of 16 oil tanks of this farm to the CPC.
But this decision was reversed on a memorandum presented by the Prime Minister in the Cabinet meeting held in June 2016 due to objections by the LIOC.
Thereafter the Cabinet had approved a joint memorandum submitted by him as the subject Minister along with the Minister of Power and Energy on November 26, 2016 to hand over 16 tanks to the CPC.
The aim was to immediately undertake and utilise three tanks out of 16 at the UTF to ensure a steady supply of fuel required to fully operate the thermal power plants belonging to Ceylon Electricity Board (CEB) and the private sector.
The decision to acquire the tanks was taken to obtain additional diesel and fuel oil stocks which will be needed with the impending drought, the Minister said.
The tank farm deal was signed between the then Treasury Secretary, CPC and LIOC on February 7, 2003 and the LIOC took over the possession of 99 Tanks at Trincomalee Tank Farm for a period of 35 years.
Since the past 14 years, LIOC is paying lease charges of US$100,000 for the tank farm in accordance with the agreement even though the lease deed had not been executed by the CPC and the government due to unknown reasons, LIOC Managing Director Shyam Bohora told the Business Times.
He noted that the LIOC is agreeable to the new business plan to jointly develop the tank farm but there was no agreement on the handing over of some oil tanks to the CPC.
A significant investment of around US$300 million will have to be made to rehabilitate the UTF and the 2017 budget has also suggested developing the oil tank farm jointly by the CPC and LIOC, he disclosed.
Mr. Bohora noted that his company is ready to supply petroleum products to the CPC in accordance with the urgent needs whenever they have required such assistance under product sharing arrangement.
He added that that the LIOC is willing to supply fuel to CPC enabling it to manage the power sector requirements at present with minimum costs and time without trying to take over 16 tanks and utilise three of them in the UTF.
The LIOC also offered to work together with the CPC in using the tanks in the Lower Farm to store fuel, he revealed.
Meanwhile the Common Workers Union (CWU) of the CPC has filed a fundamental rights petition in the Supreme Court on February 9, 2017 seeking a ruling that the tank farm be returned to the CPC removing it from the management of the LIOC declaring the retention of the possession of tank farm by LIOC to be illegal and unlawful.
The CWU claimed that the parties to the original agreement has failed to execute a lease agreement as agreed within the stipulated period and since the validity of the take-over agreement comes to an end, the said taking over agreement has no force in law at the moment.