IOC to operate oil plant in Sri Lanka with local ally

Published: 18th May 2013 10:06 AM  |   Last Updated: 18th May 2013 10:06 AM   |  A+A-

Ending a decade-long uncertainty, India has proposed to Sri Lanka that it is willing to operate an oil storage plant in Trincomalee harbour, a crucial strategic asset, jointly with a local partner. This key arrangement will provide India a major advantage, considering that the Trincomalee plant is the largest fuel storage facility between the Gulf countries and Singapore.

The offer from New Delhi was made to Colombo earlier this month, with its Indian Oil Corporation (IOC) formally conveying to Ceylon Petroleum Corporation (CPC) that it was ready to jointly operate the China Bay oil tank farm.

It was in February 2003 that IOC’s subsidiary Lanka IOC (LIOC) signed a tripartite agreement with CPC and the Sri Lankan Government to operate the farm through a long-term 35-year lease.

The 2003 agreement was signed when present Opposition leader Ranil Wickremsinghe was at the helm of the Sri Lankan Government, and the foundation stone for the modernisation of the plant was laid by then Indian Petroleum Minister Ram Naik.

While the LIOC had taken over the operation of the plant with a lot of fanfare, it has been unable to increase the utilisation of the tanks, which are more than 70 years old. So far, only about two dozen of the storage tanks are being used, causing some angst in the Lankan Government.

 From December last, reports surfaced in the Sri Lankan media that Colombo was interested in taking back possession of the oil storage farm from India. But, LIOC has refuted the reports.

But matters moved at a fast pace since March this year after India voted against Sri Lanka in the UNHRC over Colombo’s inaction on war crimes. A Sri Lankan minister said Colombo would acquire the unutilised oil tanks back from LIOC. India’s External Affairs Ministry, though, immediately dismissed the likelihood of Sri Lanka taking back the facility’s operations. But, in both capitals, there seemed to be an urgency to bring a closure to the long negotiations over the agreement.

 In April though, when Sri Lankan Finance, Planning and Economic Development Secretary P B Jayasundra was in New Delhi, one of the big ticket item on agenda was negotiations over the China bay farm, with Colombo keen to bring in their local firm into operations.


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