News
Petroleum pipeline gets delayed again
Officials this week passed the buck over the near year-long delay in awarding a tender to complete the final phase of a crucial fuel pipeline from Colombo Port to the Ceylon Petroleum Storage Terminals Limited (CPSTL) facility at Kolonnawa. Petroleum Corporation trade unions warn that failure to complete the pipeline could plunge the country into another fuel shortage should the single, dilapidated channel currently transporting refined diesel, petrol and aviation fuel get damaged.
Repairs to the 12-inch pipeline have been ongoing since 2015. While 80 per cent of work has been finished by the Ceylon Petroleum Corporation, a tender must be awarded for a section to be laid underground, as the CPC lacks the necessary technical expertise for this. Tenders were first called in February this year. The deadline for submission of bids was extended twice. Eight bidders ultimately submitted bids, but five were rejected at the technical stage. The lowest bidder then ran into a technical issue by quoting prices in the wrong currency. This bidder also asked to increase its fee saying that, as the deadline was twice extended, the earlier offer no longer applied.
Even with the revision, however, this bid was considerably lower than the second lowest in the list. But attempts are reportedly being made to award the tender to the second lowest bidder, alleged D. J. Rajakaruna, Convener of the CPC Trade Union Collective. If the lowest bidder has the required technical expertise and if the company has adhered to tender procedure, there is no reason why it should not get the tender, Mr. Rajakaruna said. “The CPC and CPSTL management told us they will complete the pipeline by March 2018,” he pointed out. “This won’t be possible as the tender is yet to be awarded.”
At present, there is only one 10-inch pipeline transporting refined diesel, petrol and aviation fuel from Colombo Port to Kolonnawa. This pipeline is nearly 80 years old and springs leaks from time to time. “If there is a major leak, the country’s fuel supply will be severely affected,” the trade unionist said. “The impact on aviation fuel in particular will be devastating.”
The delay means that the authorities cannot shut down the Sapugaskanda oil refinery for essential maintenance. It must be kept in operation as the existing 10-inch pipeline cannot transfer fuel at high speed due to its condition. Shutting down the refinery in these circumstances would lead to a fuel shortage. The refinery, therefore, has not been serviced in three years.
But several key officials absolved themselves of responsibility for not awarding the tender. Petroleum Resources Development Ministry Secretary Upali Marasinghe replied via SMS that our question should be directed to CPC and CPSTL Chairman Dhammika Ranatunga. Mr. Ranatunga could not be contacted.
Sanjeewa Wijeratne, CPSTL Managing Director, said the tender process is being handled by the Cabinet Appointed Procurement Committee (CAPC) and not the CPSTL. He also explained that the section for which the tender was due to be awarded required horizontal directional drilling (HDD) with a part of the pipeline being laid about 20 metres below surface.
The line will travel underground along three areas — from Dolphin Pier to Colombo Harbour; at Mahawatta, where squatters in the vicinity are refusing to leave; and at Orugodawatta, under the rail tracks. There were “no quick fixes”, Mr. Wijeratne insisted. And the CPSTL’s hands were tied as the tender process was outside its purview. He was hopeful that repairs to the pipeline could be done quickly, so that there would be two pipelines in operation. Then, if one were to fail, the other could be used.
Mr. Wijeratne added that, if upgrades had been done to the pipelines on time over the past 15 to 20 years, the offloading of each 40,000 metric tonne fuel tanker at Colombo Port could be done significantly faster than the seven days it takes at present.
CPC trade unions have submitted a detailed report to Minister of Petroleum Resources Development Arjuna Ranatunga, warning that fuel security was under severe threat due to a variety of factors. These include lack of storage facilities, delays in repairing pipelines and a failure to improve the Sapugaskanda refinery.
Compiled by the CPC Trade Union Collective–comprising six major unions of the Corporation–the report says the country now has insufficient capacity for buffer stocks as the infrastructure has not been improved in line with increased fuel demand. It would require 21 fuel storage tanks of 10,000mt each to store one month’s worth of buffer stock.
Building these in Colombo would cost an estimated US$ 105mn, the unions say. A total of 53 tanks costing US$ 245mn would be required to store two months’ worth of buffer stocks; for three months, this would be 86 tanks at a cost of US$ 460mn.
Without timely improvements, the Sapugaskanda refinery can now only meet about 20 percent of national demand. This has caused increased importation of refined fuel–diesel, petrol and aviation fuel–the report warns.
A third major concern is not carrying out repairs on the pipeline system. The single pipeline taking fuel from the Port to Kolonnawa is prone to leaks. Work on the 12-inch pipeline has been going on since 2015.
Another 10-inch line has been abandoned since 1997. Only the section from Kolonnawa to the Kelanitissa power station of this pipe is working. The part between the power station and the port has been abandoned.
The unloading point for fuel tankers at Muthurajawela is also in urgent need of repair, the unions say. There was a severe risk to supply in not carrying these out.
The best solution, the unions argue, is for the CPC to take over the storage tanks at Trincomalee. CPC engineers calculate that these can be refurbished for USD60-70 million. On the other hand, building 21 new tanks to increase buffer stock to one month, along with another unloading point and pipeline would cost an estimated USD160 million. Construction would take two to three years, at minimum.