The proposed oil pipeline from India to Sri Lanka reportedly includes a provision requiring a minimum purchase commitment, currently under review by Sri Lankan officials, The Sunday Morning learns.
Additionally, it is understood that if Sri Lanka is unable to meet the specified purchase volume outlined in the clause, the Government will be obligated to make payments.
Initially, the proposed multi-product oil pipeline between India and Sri Lanka aims to establish a network linking Nagapattinam in India to the Trincomalee Oil Tank Farm and Colombo in Sri Lanka.
Discussions regarding the pipeline began in February after talks between Power and Energy Minister Kanchana Wijesekera and officials from the Indian Oil Corporation (IOC) during the India Energy Week in Goa.
During these discussions, both parties explored the feasibility and potential benefits of the project.
The primary objective of the proposed pipeline is to bolster Sri Lanka’s energy security by offering a more dependable and efficient method of importing petroleum products.
The existing collaboration between Sri Lanka’s Ceylon Petroleum Storage Terminals Ltd. (CPSTL) and Lanka IOC (LIOC) in Trincomalee laid the groundwork for further joint ventures and investments between the two nations.
When approached by The Sunday Morning, Power and Energy Ministry Secretary Dr. Sulakshana Jayawardena confirmed receipt of a proposal from India for an oil pipeline between the two nations.
“The Indian proposal suggests a pipeline route from India to Muthurajawela and Trincomalee. We proposed it to function as both an import and export route. We expressed concern over the requirement for minimum purchasing, especially given our plans for a refinery and an oil export mechanism via Muthurajawela and Kolonnawa. The proposal stipulates that if a certain purchase volume isn’t met, we would incur payment obligations,” he explained.
“There are several key players involved, including the Ceylon Petroleum Corporation, LIOC, RM Parks Global, United Petroleum, and China Petroleum and Chemical Corporation (Sinopec). They will procure and import their requirements using their own mechanisms. We cannot mandate them to source from India,” he added.
When asked about the minimum purchasing clause, Dr. Jayawardena said that the proposal included the requirement for Sri Lanka to make a minimum purchase from India, and in case of failure, Sri Lanka would have to pay.
Dr. Jayawardena also highlighted the potential for enhanced energy security through the pipeline. “This offers an alternative means to meet petroleum product demands. However, it’s important to note that we are still in the early stages. No agreements or proposals have been finalised,” he clarified.
In response to further inquiries, Dr. Jayawardena noted that the IOC was investing in the pipeline project.