News
State-owned Litro steps in to fill gas void stemming from Laugfs lapses
View(s):By Sajeniya Sathanandan
Litro Gas Terminal Lanka has moved to stabilise cooking gas supplies amid panic stemming from a shortage of gas from privately held Laugfs Gas.
State-owned Litro confirmed that 38,000 metric tonnes of LP gas have been secured to ensure supply throughout March.
The Chairman of Litro Gas Lanka Limited and Litro Gas Terminal Lanka (Pvt) Ltd., Channa Gunawardana, said that “28,000 metric tonnes of gas were ordered for February. A continuous supply of new cylinders is scheduled to begin in March, as an order of 38,000 metric tonnes has been placed.”
Even with new supplies, it will take two to three months for the market to stabilise. Pic by Indika Handuwala
A main reason for the consumer panic is the lack of Laugfs cooking gas supply of yellow canisters in the market. Laugfs typically supplies about 20% of the domestic market, but because it is unable to supply, demand for Litro gas has increased significantly.
Customers who previously owned both Litro and Laugfs cylinders are now refilling their Litro cylinders.
Litro has increased domestic supply and is also now supplying large companies and hotels that had relied solely on Laugfs. For example, the Shangri-La Hotel in Hambantota is now being supplied by Litro, Mr Gunawardana said.
He said it is “impractical to suddenly increase gas supply by 20% to cover the gap left by another provider, which has led to the current squeeze in supply.”
He also said the storage capacity is limited, which has been a consistent problem for the last 30 years but is not the specific cause of the current gas crisis.
According to Laugfs Gas Plc, customs officials visited the Hambantota terminal for assessment on 24 February, which is seen as a sign that the government recognises this as a national issue.
Laugfs has offered to pay back taxes and duties to exit the hub status just to get the terminal operational again, but the government has been slow to act. The company recently secured new supplies from the Maldives, with ships expected to arrive soon. Even with new supplies, it will take two to three months for the market to stabilise.
Because the Hambantota terminal is non-operational, Laugfs has had to import LPG through Colombo using small ships and a limited 3,000 MT storage facility in Mabima. Logistical challenges caused a supply disruption at Laugfs, which led customers to shift to Litro. Litro’s smaller storage capacity of 8,000 MT could not handle this sudden surge in demand, resulting in shortages.
Several external factors impeded Laugfs’ ability to operate the Hambantota terminal — disruption of the Bangladesh market during the coronavirus pandemic, Sri Lanka’s economic turmoil and lack of foreign exchange, international suppliers not accepting Sri Lanka’s letters of credit, and halting imports and re-exports.
Because Laugfs could not meet the 60% export requirement, the government declared them in violation of the Hub Act. As a result, the US$85 million Hambantota terminal has not been in operation for nearly a year.
This terminal was set up under a hub status agreement, which required Laugfs to export 60% of its LPG to markets like Bangladesh and Myanmar and sell 40% locally.
Laugfs entered the local market in 2000.
Shell established an 8,000 MT capacity terminal in Kerawalapitiya. When Shell left, the government bought the company back and renamed it Litro Gas. Litro currently holds an 80% market share and needs about 35,000 MT of LPG a month. However, due to shallow waters at their offshore pipeline, only small vessels with a maximum of 3,500 MT can be brought in. So a new shipment is needed every two to three days to maintain supply.
In 1962, the Liquefied Petroleum Gas (LPG) industry began when the Union of Soviet Socialist Republics (USSR) gifted Sri Lanka its first oil refinery at Sapugaskanda. The government established the Colombo Gas Company to sell the LPG. But in 1995, the Colombo Gas Company was privatised and sold to Shell.
Energy security is the uninterrupted and continued supply of energy, including electricity, petroleum, and gas. Because Sri Lanka is a net importer of energy, a strategic reserve of 30 to 60 days is essential for households and industries, experts said.
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