• CPC confirms IRD tax issue holding back completion of UP’s exit process
• Energy Ministry says petroleum operations ceased but formal closure pending
• UP claims Govt. failed to meet key commitment under April exit agreement
• Australian firm initiates dispute resolution after $ 27.5 m investment in local fuel market

The dispute between the Australian-based United Petroleum (UP) and the Inland Revenue Department (IRD) over taxes to be paid has stalled the exit of the petroleum player from the Sri Lankan market.

Speaking to The Sunday Morning Business, Ceylon Petroleum Corporation (CPC) Managing Director Dr. Mayura Neththikumarage stated that the point of contention delaying the exit of UP from Sri Lanka was a dispute involving taxes with the IRD.

However, he was unable to provide details regarding the amount of taxes in dispute, stating that it was a matter between the Australian petroleum company and the IRD.

Dr. Neththikumarage further noted: “The Ministry of Energy signed the exit agreement with UP on behalf of the Government. Therefore, under that agreement, there are certain things that the ministry, CPC, and IRD must do. It had a condition to clear some taxes. The rest have been cleared and the only thing remaining is the taxes.” 

Speaking to The Sunday Morning Business, Ministry of Energy Secretary Prof. K.T.M. Udayanga Hemapala stated that although United Petroleum had ceased its petroleum operations in Sri Lanka, its full exit was still pending until certain tax matters were resolved.

“UP has exited the local [petroleum] market. But there are processes to be followed when a company shuts down. It is experiencing some tax issues with regard to the taxes to be paid. There is a procedure to be followed [to shut down], and it is still going through that procedure,” he stated. 

In a recent press release, United Petroleum revealed that the company and the Government of Sri Lanka had entered into an exit agreement in April, endorsed by the Cabinet and scheduled for completion in early May. 

“United Petroleum Lanka met all its obligations under the agreement. However, despite repeated follow-ups and extensions granted to allow the Government additional time to fulfil its commitments, a key undertaking from the Ministry of Energy remains unfulfilled,” UP claimed. 

“Consequently, United Petroleum Lanka was left with no option but to terminate the exit agreement and initiate formal dispute resolution proceedings in October 2025.”

UP entered the Sri Lankan market in August 2023 after signing agreements under the previous Government’s initiative to attract international fuel retailers. The company invested $ 27.5 million to take over 150 existing fuel stations and gain the rights to build 50 new ones. 

However, despite its initial investment, it has decided to withdraw, citing a lack of profitability in the small market.

This development comes as Sri Lanka’s fuel retail industry sees more international players, with Sinopec and RM Parks Inc. (in collaboration with Shell) also entering the market. However, the industry continues to be dominated by the State-run CPC and other regional players like Lanka IOC.