COLOMBO (EconomyNext) – Sri Lanka’s state-owned petroleum refiner Ceylon Petroleum Corporation (CPC)made a profit in 2014 as it benefited from the fall in global oil prices without fully reducing local retail prices but its borrowings from banks rose.
“CPC’s financial position improved in 2014 recording a turnaround from the loss position in 2013,” Sri Lanka’s Central Bank said.
According to provisional financial statements, CPC reported a profit of 1.7 billion rupees in 2014 compared to a loss of 7.9 billion rupees in 2013. Its loss in 2012 was 89.6 billion rupees.
“The main contributory factor for the improvement in the financial position of CPC was the decline in global fuel prices during the second half of the year without a full adjustment of domestic fuel prices, resulting in a higher profit margin,” the Central Bank said in its annual report for 2014.
Improved debt recovery also helped CPC to reduce outstanding trade receivables from government entities to 34.1 billion rupees at end-2014 from 53.2 billion rupees in 2013.
But the report noted that CPC’s total liabilities to the banking sector increased by 22.2 billion rupees to 245.6 rupees billion during 2014, reflecting increased foreign currency borrowings.
The average price of crude oil imported by CPC fell by 4.8 percent to 104.53 US dollars a barrel in 2014 from 109.84 US dollars a barrel in 2013.
The report, released last week, noted that in general the CPC’s average crude oil import price is higher than the international Brent crude price because of its need to import two types of crude oil to blend.
That’s because its sole refinery at Sapugaskanda is designed to refine Iranian Light crude.
Sanctions against Iran blocked Iranian oil imports forcing the CPC to import two types of crude from other origins and blend them in the refining process.
Term contracts signed by CPC to ensure regular supplies of petroleum were another reason for the difference in prices, the Central bank explained.
This dependence on Iranian crude highlights the need to expedite the Sapugaskanda Oil Refinery Expansion and Modernisation Project “enabling the supply of petroleum products in a cost effective manner,” the report said.