- Seeks return of deposits and licensing fees
- Invests $ 27.5 m for 150 stations and 50 new rights
Sri Lanka is set to sign a termination agreement with Australian-based United Petroleum (UP) after the company decided to cease its operations in the country.
A senior official from the Ministry of Energy confirmed that the issue with UP had been resolved, and that the Cabinet had approved the termination agreement.
Since 1 January 2024, the Ceylon Petroleum Corporation (CPC) has taken over the operation of 64 fuel stations previously managed by UP.
This move followed UP’s decision to exit the Sri Lankan market due to difficulties in importing fuel.
The stations had been handed over as part of an interim solution, allowing the CPC to manage them until the termination agreement was finalised.
According to the official, the process is now focused on technical matters such as the settlement of remaining stocks, deposits, and loyalty payments.
The Ministry of Energy has completed the necessary procedures and the final step is the signing of the termination agreement, which is expected to happen within the next month.
Despite speculation of possible arbitration in Singapore, the official clarified that UP was not pursuing any legal action and was not demanding any additional compensation as per the current discussions.
Instead, the company is seeking the return of its deposits and licensing fees, as stipulated in its agreement with the Government.
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.