Sri Lanka state refiner mulls investments amid energy policy changes
ECONOMYNEXT – The Ceylon Petroleum Corporation (CPC), Sri Lanka’s state-run refiner, says more clarity on government energy policy and fuel mix is needed given planned upgrades to oil infrastructure costing over US$2 billion.
“Before we embark on new projects we should know our energy policy. Then we can plan our own investments,” said CPC chairman Dammika Ranatunga.
“As a country, we have to have our energy policy in which the energy mix should be incorporated,” he told Economynext.com in an interview.
The CPC, which has just completed a 35-day overhaul at its 50,000 barrel-per-day (bpd) refinery at Sapugaskanda, is in the midst of upgrading petroleum infrastructure which had been neglected for decades.
Ranatunga said the maintenance work, which takes place every three years to monitor and replace critical parts of the plant needed to run at optimum levels, had improved efficiency and productivity at the refinery.
But more clarity on government plans for its energy sector was needed given ongoing and planned infrastructure improvements that will cost a few billion dollars.
The CPC is considering at least doubling the capacity of its refinery to 100,000 bpd or more at an estimated cost of about $2.5 billion.
It is also building more storage tanks and replacing decades-old pipelines, prone to leaks, linking the refinery and tanks with oil unloading terminals in Colombo port that will also cost several tens of millions of dollars.
Ranatunga said proposals for large-scale adoption of natural gas in the island’s energy sector, to exploit recently-discovered offshore gas reserves, needed to be thought through carefully to ensure best returns on petroleum investments being made now.
The government has said it is also considering building import terminals for liquefied natural gas until the Mannar Basin gas reserves become commercially recoverable.
“If we convert to LNG, what about investments we made for petroleum?” Ranatunga asked, noting that the CPC built pipelines to supply a thermal power plant at Kerawalapitiya costing spent $60 million.
Sudden changes in the fuel mix could made it difficult to recover existing investments, he said, noting that countries like the United States and China were making the conversion to cleaner fuels only gradually.
“We need to be careful when we put money into certain things,” Ranatunga said. “There’s no point in me investing in (petroleum) pipelines if in the future we are going for LNG.”
Proper feasibility studies were needed before deciding on the energy mix, including financial and safety aspects, since handling, storing and transporting different types of fuels needed different infrastructure and safety procedures.
“Petrol and LNG are both inflammable but burn differently. Do we have the fire fighting capacity to handle the situation. If not, what investment do we need to make?”
(COLOMBO, May 09, 2018)