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Sapugaskanda refinery to be closed again due to crude oil shortage 

31 Dec 2021

  • Closure from 3 January, to be opened before 30 January 
  • Unable to source crude oil due to forex crisis: Ministry of Energy 
    BY Shenal Fernando The Ministry of Energy announced yesterday (30) via a press release that the Sapugaskanda Oil Refinery will be temporarily closed for the second time in its 52-year history from 3 January onwards.  According to the Ministry, the refinery will be closed due to the difficulty faced in sourcing the required crude oil as a result of the existing foreign exchange liquidity crisis in the country. They further stated that Ceylon Petroleum Corporation (CPC) intends to reopen the refinery before 30 January once the necessary crude oil shipments are received.  The Ministry of Energy further asserted that there will be no shortage of fuel in the country despite the temporary closure of the refinery because the refinery supplies only 14% of the country’s petrol demand and 29% of the diesel demand.  The Singaporean company which was awarded the long-term contract to supply crude oil to Sri Lanka is expected to deliver the next shipment of crude oil on 26 January. Closure of the Sapugaskanda refinery in early January 2022 was anticipated since early December. Speaking to The Morning Business on 19 December, Ministry of Energy Secretary K.D.R Olga stated: “The Sapugaskanda refinery is currently using murban crude oil and the previous shipment of that crude oil received prior to the reopening of the Sapugaskanda refinery earlier this month will most probably last till only the first week of January 2022.”  Explaining further, she stated that the supplier requires that the order for murban crude oil be made 90 days in advance in order to secure the ship and book the cargo. However, it appears that due to the existing foreign exchange liquidity issues in the country, the process of placing the order has been delayed and consequently the next shipment of crude oil will arrive in the country only by 26 January.  She further stated: “We have called for tenders in respect of several alternative varieties of crude oil which can be used in the Sapugaskanda refinery as replacement for Murban crude oil and which can be delivered within a short time of placing the order.”  However, the Ministry of Energy in its press release yesterday admitted that such efforts to source alternate varieties of crude oil had failed due to the existing US dollar shortage. The Ministry further admitted that due to the downgrading of the country’s sovereign rating by rating agencies, acquiring the necessary crude oil on debt has proved to be difficult.  Increasing world crude oil prices together with the existing foreign exchange liquidity crisis has severely hamstrung the ability of CPC to source its necessary fuel imports as the company is not a foreign exchange earner. Consequently, 2021 has been plagued by numerous fuel supply disruptions. The Sapugaskanda Oil Refinery was previously closed on 15 November due to similar difficulties in sourcing the necessary crude oil due to the foreign exchange liquidity crisis in the country.


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