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Fuel crisis: CPC requests fuel price revision

13 Feb 2022

  • CPC incurs a monthly loss of Rs. 8 b
  • Current pricing makes sustainability difficult
  • Rising crude cost threatens production at refinery
By Asiri Fernando The Ceylon Petroleum Corporation (CPC) has submitted a request to the Ministry of Finance seeking approval for a quarterly review of fuel prices, aimed at reducing losses and keeping the price at the pump more inline with market trends, The Sunday Morning learns.   According to the CPC, the envisaged mechanism will be capable of passing on some of the market price reduction to the consumer while allowing the Government to absorb some of the impact of market price increases, thereby reducing the effects of sudden price surge in the market on the consumer.   “What we have proposed to the Ministry is a mechanism to review the fuel prices once every three or four months. In other countries, the fuel pricing is reviewed weekly or even daily,” CPC Chairman Sumith Wijesinghe told The Sunday Morning. Minister of Energy Udaya Gammanpila confirmed to The Sunday Morning that the request had been made by the CPC to the Treasury and he too had been informed of it. Gammanpila said that he was awaiting the response from the Treasury on the matter. Wijesinghe stressed that the CPC was still running at a loss, even after the recent price increase. He pointed out that even though a six-month-long tender for crude import had been awarded, the rising price of crude could complicate Sri Lanka’s purchasing power due to the ongoing forex crisis. “With the price of a barrel of crude pushing beyond $ 90, we will not be able to sustain supply if there isn’t a price revision. Continuing to run at a loss is not sustainable. There is no evidence to indicate that the price of crude will reduce in the first quarter of this year. We are now incurring around Rs. 8 billion in losses each month,” he explained. According to Minister Gammanpila, crude oil ordered through a tender is arriving on schedule, with another consignment planned to arrive in Sri Lanka next week. Last year, the Energy Minister requested the Government to allow fuel to be sold at a more ‘cost reflective price,’ highlighting the debt owed to the CPC by State entities and the challenges faced in importing fuel. Sri Lanka is planning to utilise a $ 500 million revolving loan scheme from India to help sustain fuel supplies. Refinery operations: Possible impact of rising crude prices Sri Lanka’s only refinery may have to run at a less-than-optimal capacity in the coming days due to the rising cost of crude oil. Responding to a query, CPC Chairman Sumith Wijesinghe told The Sunday Morning that if the price of crude (Brent) continued to rise, the sole refinery may have to operate at ‘low throughput’ capacity instead of maximum output. Such a move may affect the supply of kerosene and furnace oil in the local market and may also impact thermal power generation, which uses furnace oil and diesel sourced from the refinery. With hydropower at a critical level, any reduction in fuel supply to thermal power generation may prolong the power crisis.  The power regulator is meeting officials of the Ceylon Electricity Board this weekend to evaluate a request for planned load shedding (power cuts) for the next three months. According to Wijesinghe, the Sapugaskanda facility refines 5,000 barrels of crude oil per day. At present, the refinery produces 1,400 MT of furnace oil, 1,500 MT diesel, 520 MT petrol, and around 1,000 MT of kerosene/jet fuel per day.  


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