ISSN: 1391 - 0531
Sunday March 2, 2008
Vol. 42 - No 40

CPC cheaper gas project to go ahead

Laugfs head says move will not make an impact on the market

By Malik Gunatilleke

The Ceylon Petroleum Corporation (CPC) will go ahead with its project to sell LP gas at cheaper rates despite continuous protests by Laugfs Gas Pvt Ltd (LGPL) CPC chairman Asantha De Mel said. Following the CPC’s announcement of its venture into the domestic gas market, LGPL took the case to the Supreme Court and were given an injunction preventing the CPC from calling for tenders.

However, Mr. De Mel told The Sunday Times that this measure would not affect the ongoing project as it was never in the agenda to involve an outside party in the venture.“We are simply using our imports to produce and sell our own brand of LPG for a price which is cheaper than those of other competitors in the market. There was no question of getting any outside party involved,” he said.

Mr. De Mel said that the CPC is hoping to begin the production of LPG by August while it is currently in the process of importing 50,000 cylinders as a start. Currently LGPL buys 30% of its requirements from CPC for a flat rate excluding freight charges while the rest is imported separately. LGPL is only able to maintain the Rs. 25 price cap between its product and that of Shell Gas Lanka Ltd (SGLL) due to the small advantage received through purchasing the CPC imports.

LGPL chairman W.K.H. Wegapitiya told The Sunday Times that if the Government was truly interested in providing consumers with cheaper LPG it could sell its base products to LGPL cheaper instead of wasting the tax payers’ money.“There is no need to invest hefty amounts of public funds to invest in a brand new business. If the CPC can sell its imports to LGPL for a cheaper price then we would be able to pass that benefit to the consumers,” he said.

He said that 51% of the State owned Colombo Gas Company (CGC) was sold to Shell in 1995 while the Government still held 49% of the shares. He said that if the Government wanted to enter the market it could regain control of the CGC instead of starting a new brand.

With CPC’s arrival in the domestic LPG market, the CPC will use all its imports for the production of its LPG brand while LGPL will be forced to import 100% of its product causing LGPL prices to soar to as much as Shell Gas prices. Mr. Wegapitiya said the CPC, which currently produces only 10% of the domestic requirement in gas, will not make an impact on the gas market and would end with the majority of consumers paying more for gas.

“CPC’s gas venture would result in increases in our pricing and in turn our product would look unattractive in the market. This would only mean that the cheapest alternative in the market for gas will be lost while only a privileged few would benefit from purchasing CPC gas,” he said.

However, Petroleum and Petroleum Resources Minister A.H.M. Fowzie said that the CPC hopes to expand its business and target as much as 50% of the market.“We are currently making some improvements in the refinery and afterwards we hope to expand the project and target a larger sector of the market,” he said.

Minister Fowzie added that with the CPC’s entry into the gas market, its competitors will be pressurized to maintain lower prices for their products to stay competitive in the market.

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