Sri Lanka going ahead with refinery upgrade

COLOMBO, Dec 02, 2014 (EconomyNext) – Sri Lanka’s sole oil refinery, which returned to profitability this year, will be modernized in a 1.5 billion US dollar project to increase efficiency and yield cleaner fuel, an official said.

Susantha Silva, Managing Director of state-run Ceylon Petroleum Corporation, said the modernization was essential to improve the profitability of the aging 50,000 barrels-per-day refinery at Sapugaskanda, on the northern outskirts of the capital Colombo. 

Refinery capacity, which now can meet only one-third of current demand, will be doubled and processing improved to make more petrochemical products.

Silva said the CPC made a profit of 3.5 billion rupees up to September this year on sales of 490 billion rupees.

The CPC suffered a loss of 7.9 billion rupees in 2013 because of high world oil prices and local price control, he said.

"Our refinery is a basic refinery. It does not make sulfur. We’re burning gas and wax which can be recovered. There are many petrochemicals which we can recover, so we need to modernize it," Silva said. "We need to increase the quality and quantity of products."

The modernization will cost 1.5 – 2 billion dollars compared with the refinery’s original cost of 169 million dollars, he told an energy forum organized by the Petroleum Resources Development Secretariat and University Grants Commission.

"The front-end engineering design will take about 9-12 months. Then only we’ll know how much it will cost," Silva said adding that the project could take 3-4 years and the entire cost recovered in 5-6 years.

"We need to modernize the refinery to meet world fuel standards which are improving and to comply with environmental requirements," he said. "If we don’t modernize we won’t be able to protect the environment."

The present refinery can only produce 2,500 parts per million sulfur diesel whereas advanced countries are producing 10 ppm diesel, a cleaner fuel required by newer cars which are being imported into the island.





The modernization will also increase production of jet fuel for which demand is growing.

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