Business

Reclaiming Trinco oil tanks from India: Three discussions ‘successful’

By Madhusha Thavapalakumar

The Government expects a positive outcome from its discussions with Lanka Indian Oil Corporation (LIOC) on reclaiming fuel storage tanks in Trincomalee as the latest rounds of discussions were “successful”, according to Minister of Energy Udaya Gammanpila.

After Sri Lanka’s direct discussions with the Indian Government on reclaiming the 25 tanks currently leased to LIOC ended unsuccessfully, the Government began negotiations with LIOC through the Indian High Commission in Colombo. 

Fuel storage tanks in Trincomalee

“Discussions with regard to getting back the Trincomalee oil tanks that are with the LIOC are in progress. We are not disclosing anything to the public as it would jeopardise our ultimate goal. But I can tell you that there have been three rounds of discussions – they were successful and we are optimistic of the outcome,” the Minister told The Sunday Morning Business

For further details on the discussions, we spoke to LIOC Managing Director Manoj Gupta, who stated that the Ceylon Petroleum Corporation (CPC) would be interested in utilising some tanks in the Upper Tank Farm (UTF) and discussions are in progress to achieve mutually acceptable solutions.

He added that utilisation of the tanks in the UTF following repair/refurbishment could serve as a good example of mutually beneficial bilateral corporation.

“However, refurbishing 84 tanks from the WWII (World War II) era will involve considerable expenditure and any such agreement will have to be agreed between the two Governments. LIOC has an open approach on this matter to enable the exploration of long-term solutions that benefit all stakeholders, and mutually beneficial commercial co-operation,” he added.

Furthermore, he noted that LIOC is committed to the adherence and implementation of the decisions taken by the Governments of India and Sri Lanka.

However, he refused to divulge more details due to the “inter-governmental nature of these discussions”.

Even though the Indian Government has not been in favour of giving 25 fuel storage tanks in Trincomalee back to Sri Lanka, the new Indian High Commissioner to Sri Lanka Gopal Bagley has been more receptive and assured the Sri Lankan counterpart that the High Commission would hold discussions with LIOC, the lessee of the fuel storage tanks in Trincomalee.

The Trincomalee oil tanks, built by the British, were never used to its full capacity after Independence in 1948. The farm initially had 101 tanks built with steel one inch think. Each tank could store 12,000 tonnes of fuel, bringing the total capacity of the tanks to 1.2 million. After the British left the country, only 15 tanks were used by the CPC while the rest was taken over by the surrounding wilderness. Out of the 101 tanks, one was destroyed in an Air Force plane crash in the 1960s. In 2003, Sri Lanka leased the Trincomalee oil tanks to LIOC for 30 years, which expires in 2033.

The Sunday Morning Business reliably learnt that after the end of the lease agreement, Sri Lanka is not willing to renew the agreement as they want to develop the storage tanks for local purposes. 

Reclaiming storage tanks in Trincomalee or commencing joint ventures with LIOC on Trincomalee oil tanks are long-pending requests made by Sri Lankan authorities from consecutive Indian Governments and the LIOC. Nevertheless, none of it progressed. In 2017, then Minister of Petroleum Chandima Weerakkody initiated talks with LIOC, proposing a joint venture pertaining to 84 storage tanks in Trincomalee as LIOC uses only 15 tanks out of 99 existing tanks. Even though this proposal received the Cabinet of Ministers’ approval and was discussed with LIOC, it was abandoned subsequently. The discussions were renewed once again by the present Government as Sri Lanka had no methods to store fuel when there were negative international oil prices during the peak of the pandemic in the second quarter of this year. Therefore, the Government is looking for methods to ensure that they do not miss similar opportunities to store fuel at comparatively lower prices in the future. 

Sources noted that the CPC managed to store fuel in two tanks with a capacity range of 20,000-25,000 tonnes in Jaffna and Puttalam during the peak of the global pandemic.