local consortium backs refinery project
Two big Japanese and South Korean trading houses and two local blue
chip conglomerates are backing the project to build a crude oil
refinery cum power plant complex next to the Ceylon Petroleum Corporation
developer, Dr. Lucky Wijetilleke, president of Global Energy and
Industrial Operations Inc. (GEO), which is promoting the venture,
said the two big foreign firms were now holding talks on forming
a consortium to support the project.
Two other smaller local firms, a construction company and a shipping
industry company, are also involved, he said in an interview. He
declined to identify the companies.
last week approved the project despite the earlier objections of
President Chandrika Kumaratunga who alleged it violated tender procedures
and was a move to privatise the CPC.
consists of a 75,000 bpd (barrels per day) refinery and two 150MW
combined-cycle gas-turbine power plants. It will cost $564 million.
The developers plan to rent under-utilised CPC facilities and pay
CPC a rental for 20 years, and then transfer the refinery to the
who was also the promoter of a big $2 billion refinery in Hambantota
in the mid-1990s under the previous regime, said they opted for
a "compact" refinery because a big one was no longer viable.
This was because of excess crude oil refining capacity in the region
and current low refining margins.
now very difficult to raise big money that would be required for
big 'greenfield' refining projects," said the former CPC managing
director who also was a World Bank energy expert for 17 years. The
infrastructure costs alone for coal or LNG (Liquified Natural Gas)
importing facilities would be too expensive - around $400 million.
that was there for a large refinery is no longer present,"
Dr. Wijetilleke said. GEO, formed in 1996 by Dr. Wijetilleke and
two former World Bank colleagues, believes it can keep project costs
down by using under-utilised CPC infrastructure, through speedy
implementation, and by supplying to niche markets.
"That's why we decided on a small refinery that would be an
add-on to the existing refinery," he said. "Our cost of
production is lower."
GEO is negotiating
a power purchase agreement with the Ceylon Electricity Board, offering
to supply power at not more than 4.5 US cents per kWh with crude
oil at $18 a barrel and 5.8 US cents per kWh if crude oil was at
$32 a barrel. "I told the CEB our power will be cheaper than
what they are buying from others now which is 6.4 - 7.8 US cents
per kilowatt hour," Dr. Wijetilleke said.
GEO's aim is
to identify energy and industrial projects in developing countries
at its own expense and promote them among potential investors for
funding and implementation. The Sapugaskande refinery project offers
an "optimum combination of fuel and technology".
produces 'gas turbine fuel' for the CEB's combined-cycle gas-turbine
(CCGT) power plants, which next to LNG is the cleanest fossil fuel
The CCGT plants can be switched to LNG later on as demand for thermal
power grows, said Dr. Wijetilleke.
GEO is also
eyeing niche export markets for petroleum products and expects to
have a product off-take agreement with consortium members. The current
excess refining capacity in the region is expected to turn into
a shortfall by 2010, assuming no new refineries are built by then.
So there is
potential for "marginal" exports of small quantities of
products like LPG, low sulphur diesel, jet kerosene and petrochemical
feedstock. India and China could have a potential export market
of 780,000 bpd because of growing demand and the projected shortfall
in refining capacity by 2010.
said he was not deterred by his previous bad experience in trying
to promote an energy project in Hambantota where he took his local
partner to courts for breach of contract.
going to give up this country just because I was treated badly,"
he said. "I love this country and I intend coming back here.
"If people like us don't come back - with our experience and
the contacts we've made - who else is going to bring it back?"
'No' to fresh poll
The business community does not want another general election. An
overwhelming majority of business leaders polled by The Sunday Times
FT in a snap opinion survey last Friday voted against the idea of
polled, most said another election was not desirable while others
were in favour of a poll. Those who favoured a poll said it might
help to clear the prevailing uncertainty and that they hoped it
would result in a more stable government if the ruling party were
able to increase the number of seats in parliament.
who opposed another election said it would be "bad for business"
and could make the state of the economy deteriorate even further.
Michael about tea via Internet
By Suren Gnanaraj
Tea trade veteran Michael de Zoysa will use his 35 years of expertise
in the business to share his views about the brew on a web site
launched by Gordon Frazer and Company.
He would cover
a host of topics ranging from international tea market fluctuations
to predictions on the future of the industry. De Zoysa, Gordon Frazer's
managing director, will also answer questions put forward to him
via the site www.keellstea.com that went online last week with the
launch of the new John Keells tea for export called 'Fresh Thoughts'.
have also been addressed under the 'Tea and Health' icon, which
will be constantly updated by an Australian scientist who has agreed
to answer any queries raised by consumers or buyers.
Business Development Manager for Gordon Frazer and Company, said
that the web site was designed to simplify business transactions
between the host company and foreign bulk tea buyers. A transaction
that normally takes as long as three weeks can be completed within
a week under the new system.
brewing at George Steuarts
A battle is brewing at George Steuart and Co - the old established
plantation firm which has diversified in recent years - between
its new investors and old shareholders including former chairman
Scott Dirckze, company sources said.
The issue has
been taken to courts by both parties with temporary orders being
issued by the Colombo Commercial High Court in favour of either
side. About two years ago, Dubsy Kanagaratnam, a Sri Lankan investor
based in Britain, secured a 34 percent stake in the company by purchasing
625,000 shares held by Merchant Bank, making him the single largest
Last week an
interim order was issued in favour of Kanagaratnam, also a director
of the company, allowing the business affairs of the company and
the subsidiaries to be jointly managed by S. Skandakumar as chairman
and J.M. Wimalagooneratne as the managing director.
Both were allowed
to sign cheques issued by the company. But the Commercial Court
also banned meetings of the board of directors or shareholders of
the company unless with court permission.
K.M. de Silva, shareholder and Ranjith Wickramasinghe, Finance Director/shareholder
filed a petition in court alleging "oppression and mismanagement
of minority shareholdings by the directors."
The court then
issued an interim order preventing Kanagaratnam and other directors
from exercising their rights. That order was set aside last week.
The case is proceeding.(RC)