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Trincomalee oil tank farm: Government moves ahead with Indo-Lanka joint development

01 Jan 2022

  • New agreement will not benefit the country: TUs
  • Urge Government to follow Court decision and acquire tank farm
  • Sri Lanka regains majority control over oil tank farm: Gammanpila
By Maheesha Mudugamuwa The Government last week announced the extension of the lease agreement with Lanka Indian Oil Corporation (LIOC) regarding the oil tank farm in Trincomalee, ending a long negotiation process on the strategically located energy infrastructure. According to the agreement, the current lease on 14 oil tanks under LIOC control has been extended by another 50 years and 24 tanks will be independently developed by the Ceylon Petroleum Corporation (CPC). The announcement was made by Energy Minister Udaya Gammanpila on New Year’s Eve (31 December). An additional 61 tanks will be jointly developed by LIOC along with the newly established Trinco Petroleum Terminals Ltd. (TPTL) – of which 51% of shares are expected to be held by the CPC and 49% by LIOC.  “Therefore, with the 24 tanks under the CPC and 61 tanks under a company controlled by the CPC, we (Sri Lanka) have been able to regain a majority control of 85 out of the 99 tanks at the Trincomalee oil tank farm. Sri Lanka regaining control of the Trincomalee oil tank farm, which was handed over to Indian control through the 1987 and 2003 agreement, is a historic milestone,” a triumphant Energy Minister told the Press on Friday (31 December). Gammanpila has been an outspoken critic of the 1987 Indo-Lanka Accord and the entailed agreements regarding the strategically important Trincomalee bay and the adjacent admiralty oil tank farm, built by the British in 1930. Explaining the nature of the TPTL, Gammanpila said that the majority shares of the new company would be held by the CPC, while four out of seven directors – as well as the Chairman of the new company – would be appointed by the CPC. The auditor has the powers to audit the new company and it will be answerable to the Parliament as well, he added. However, trade unions (TUs) affiliated to the petroleum industry immediately raised objections against the Government’s decision to jointly develop the oil tank farm. Trade unionists have alleged that the Government was misleading the public by saying the country would benefit from the new agreement that it was to sign to form the new company that would develop the Trincomalee oil tank farm. Speaking to The Sunday Morning, Energy Trade Union (ETU) Convener Ananda Palitha said the country already has an independent company named Ceylon Petroleum Storage Terminal Ltd. (CPSTL), of which both CPC and LIOC hold shares. The company was formed under the Companies Act, and even though CPC has its shares, the CPSTL is operated as a separate company with separate management, he noted.  “The new company is named as TPTL which has no ‘Ceylon’ name in it like the CPSTL or CPC. This is because the new company is only for the upper tank farm which cannot be used as there is no pipeline and the tanks are also not in an operational condition,” Palitha stressed.  He further explained that even though the Government formed the new company, it did not have the rights over the lower tank farm, which is in an operational condition having nearly 17 tanks with a jetty and other facilities. Palitha noted that there was an ongoing court case filed by the trade unions on the basis that the lease agreement between the LIOC and CPC was illegal and that therefore, the Government should reacquire the oil tank farm. “We want the Government to expedite the legal procedure. So, if the court says that the agreement is illegal, the tank farm is with us and if it's legal, we can re-acquire it in 2038, once the agreement expires,” he explained. However, the ETU Convener urged the Government not to take quick decisions over the tank farm and to re-enter into new agreements, as the Minister is saying the agreement entered into by the two countries in 2003 was not a proper one and therefore, they should expedite the legal process and get legal opinion over whether the agreement is legal or not.  Furthermore, he stressed that a decision over the tank farm should only be taken after considering the court’s decision.  “In 2002, the then Government only signed a Memorandum of Understanding (MoU). Acquiring oil tank farms was one of Mahinda Rajapaksa’s election promises, but through the governments from 2005 to 2015 under his leadership, he couldn’t fulfil that,” he added.    Instead of signing a lease agreement, under Mahinda Rajapaksa’s leadership, LIOC was given permission to further expand. “The joint venture was for the 99 tanks and if we had signed the joint venture, we could have used the tanks. Earlier there was no agreement and now they are signing an agreement,” Palitha alleged. The Trincomalee oil tank farm was leased out to the LIOC by way of an agreement in 2003 on a 35-year lease, which expires in 2038. Altogether, 99 tanks have been leased out. The farm initially had 101 tanks built within an area of 850 acres. However, two of the tanks were destroyed; one in a Japanese Air raid in 1942, and the other when a plane accidentally crashed into the area in 1960. The initial construction of the oil tanks commenced in 1924 and ended in the 1930s. Following Independence, the tanks fell into disuse. The LIOC has refurbished 15 of them in the lower tank farm, which are now in use. Collectively, the tanks in operation are able to hold up to 1.2 million tonnes of fuel. During his visit to India last month, Finance Minister Basil Rajapaksa initiated fresh rounds of talks with India and the LIOC.  Accordingly, as it was reported, India had offered support to Sri Lanka on four pillars including the early modernisation of Trincomalee oil tank farm during the two-day official visit; Minister Rajapaksa had two rounds of joint discussions with his counterpart and External Affairs Minister Dr. Subrahmanyam Jaishankar. He met with the Minister for Petroleum and Natural Gas Hardeep Singh Puri and the National Security Advisor of India Ajit Kumar Doval as well. As the company is now being formed following Minister Rajapaksa’s visit, the TUs doubt whether this was an Indian demand prior to the release of $ 500 million. Also speaking to The Sunday Morning, JVP-affiliated Petroleum Common Workers’ Union (PCWU) President Asoka Ranwala alleged that the Government was attempting to sell the CPC by opening the fuel market to private players. The attempts as pointed out by the union leader were included in the new legislative measures as well as the plans for establishing the new company. “The Energy Ministry has already proposed two legislative reforms including the amendments to the CPC Act and the new Petroleum Resources Bill. The Bill is already in Parliament and amendments are also being drafted to the CPC Act,” he said, adding that by the new laws, the Government was trying to pave the way for opening up the petroleum sector for private investors.

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