A temporary arrangement allowing Litro Gas Lanka to use storage facilities at the LAUGFS Liquefied Petroleum Gas (LPG) terminal in Hambantota is expected to lapse without being extended, as both companies indicate that additional storage is no longer necessary due to stable supplies and ample stock.
Speaking to The Sunday Morning, Litro Chairman Channa Gunawardana said that the arrangement, introduced earlier this year as a precaution against potential global shipping disruptions and geopolitical tensions, was no longer required.
“That requirement no longer exists. We have enough gas coming in. Our supplier has been maintaining a strong supply of gas, so we are not looking at that agreement at all now,” he said.
Gunawardana said that the understanding between the two companies had always been informal and had never been converted into a written agreement. “It was always verbal and we are not interested in pursuing it now,” he said.
He also confirmed that Litro had never used the storage capacity allocated by LAUGFS. Assuring consumers that there was no risk of an LPG shortage, he added: “We have enough gas; we have too much gas now. So there is no gas shortage at all. There is no reason to worry.”
A senior industry source familiar with both Litro and LAUGFS operations also confirmed that the storage allocation had never been used, explaining that it had been intended solely as a contingency measure.
“The agreement was there, but Litro never showed any intention of using the terminal because it was meant only for a national emergency. LAUGFS made the storage available, but such a situation never arose,” the source said.
“Both LAUGFS and Litro have more than enough LPG. In fact, they have excess stocks. Litro has shipments arriving in Colombo, while LAUGFS has supplies coming into both Hambantota and Colombo. From a national supply perspective, Sri Lanka has nothing to worry about over the next 12 months,” the source added.
The source also confirmed that the arrangement remained verbal throughout and with Litro having no current requirement for additional storage, there appeared to be little justification for renewing it.
However, the source argued that the Hambantota terminal could still provide long-term cost advantages if Litro chose to use it in the future.
“Sri Lankan consumers could benefit because suppliers generally offer lower prices for larger deliveries. Hambantota has a storage capacity of 30,000 MT compared with about 8,000 MT in Colombo. Larger cargoes reduce the cost per MT, which could ultimately lower LPG prices,” the source explained, suggesting that greater collaboration between the country’s two LPG suppliers could improve efficiency and benefit consumers.
“For reasons unknown, Litro has never utilised LAUGFS’ Hambantota terminal, perhaps because it is owned by a competitor. If Litro imported LPG through Hambantota, the lower unit costs could translate into lower prices for consumers. Unless Litro moves from a competitive mindset to a collaborative one, the end consumer will not fully benefit.”
The temporary arrangement was introduced in March after concerns over disruptions to global shipping routes arising from tensions in West Asia and the closure of the Strait of Hormuz. Under the understanding, LAUGFS agreed to make up to 15,000 MT of storage capacity at its Hambantota terminal available to Litro to strengthen the country’s emergency LPG reserves.