In a majority of Sri Lankan households, especially urban, the Liquefied Petroleum Gas (LPG) cylinder is the primary and only energy source for cooking. Sri Lanka is fully dependent on gas cylinders, which are imported and stored in limited quantities unlike pipe-borne LPG, the safest and most modern option worldwide.
With increasing supply chain disruptions, energy market fluctuations, and current geopolitical conflicts, concerns regarding the risks surrounding LPG resources and stocks have resurfaced.
Domestic capacity
When contacted by The Sunday Morning, Litro Gas Lanka Ltd./Litro Gas Terminal Lanka Ltd. Chairman Channa Gunawardana stated that Litro’s storage capacity within Sri Lanka was limited to 8,000 MT at present.
With this being the country’s immediate buffer stock (or the maximum amount that can be physically stored in the country), Gunawardana noted that expansion plans were underway to increase storage infrastructure.
“We are going ahead with expansion, but it cannot be done in one year. It will take a few years. We are starting the process just after the New Year, with a tender process going on,” he clarified.
Given the limited storage in Sri Lanka, Litro has opted for alternative options to strengthen supply and storage security amidst ongoing global uncertainties. Acknowledging the global risks and capacity constraints, Gunawardana said that the company was attempting to procure a large vessel to store around 30,000 MT of fuel in the Maldives.
“Obviously, there is a risk with the current global situation. Therefore, to minimise this risk we are planning to bring a large vessel to Malé and station it over there. From that vessel, we can transport fuel in smaller vessels to Sri Lanka,” Gunawardana stated, adding that it would secure Sri Lanka’s supply needs for a reasonable period.
Addressing the concerns over global energy market’s price fluctuations, Gunawardana noted that ongoing geopolitical tensions would definitely lead to an increase in international LPG prices. “However, in the Sri Lankan market, we are going to maintain the prices as they are for March,” he said, noting that decisions regarding the prices for April and onwards would be taken later after assessing market conditions.
Gunawardana also highlighted how the recent shift in suppliers had reduced the country’s vulnerability amidst the global situations, as Litro’s current supplier, Swiss-based Geogas, shipped LPG from the US. “Last year we had a supplier sending gas from Oman, but this year we will get gas from the US. Therefore, under the current situation, we are reasonably alright. But we will be monitoring the situation every week to see what actions we should take on our end,” he emphasised.
Ministry response
Meanwhile, the Ministry of Trade, Commerce, Food Security, and Co-operative Development affirmed that that both Litro Gas Lanka and LAUGFS were proceeding systematically with the distribution of LPG cylinders
“The LPG shortage we witnessed was related to LAUGFS due to a small complication in the company’s distribution network,” Deputy Minister of Trade R.M. Jayawardana stated. According to him, a slight shortage within the LAUGFS distribution network can be observed every two to three months, continuing for about a week and affecting the distribution of gas to consumers.
He added: “When we consider the situation that unfolded in the last few days, the minor shortage of Litro Gas was only in the Galle District. From their end, there was a delay of about two days while the LAUGFS shortage affected the whole of Sri Lanka. Although that was the situation, it is important to know that the condition no longer exists.”
Generally, LPG cylinder orders are determined on a weekly or biweekly basis in relation to the demand during that time period. Therefore, Jayawardana stated that maintaining a buffer stock was not feasible at present. However, the ministry has informed the President of this matter, with plans to increase the amount of LPG purchased in order to maintain a buffer stock that could last at least one month.
Present demand and shortage
Addressing Parliament, President Anura Kumara Dissanayake emphasised Litro’s storage constraints in relation to LPG, noting that Sri Lanka could store only 8,000 MT at a time.
“Given the daily demand of 1,000–1,200 MT, Sri Lanka can only store about a week’s supply with that storage capacity. Therefore, we bring in 8,000 MT shipments every two days in small vessels from a large LPG vessel stationed in the Maldives,” he said. The limited buffer stock had previously resulted in supply disruptions when the daily demand increased to 1,800 MT recently, he noted.
The President criticised the current arrangements and stressed the importance of storage expansion for Litro. As an interim measure, the Government has been in discussion with LAUGFS to obtain a storage capacity of 15,000 MT from its 30,000 MT terminal in Hambantota.
“I am thankful to LAUGFS for temporarily agreeing to provide 15,000 MT of storage to support the Government’s supply under these immediate circumstances,” he stated, noting that the supply disruption faced by LAUGFS stemmed from the collapse of its export market. “LAUGFS supplies only 20% of its stock to the local market. The collapse of export demand has contributed to the shortage of its cylinders in the market,” he noted.
It was further stated that through emergency regulations, the Government had allowed LAUGFS an increased quota of supply to the local market with all applicable taxes. Additionally, 100,000 new Litro gas cylinders had been ordered in order to sustain cylinder shortages, with a shipment expected on Thursday (12).
Litro Gas Lanka dominates Sri Lanka’s LPG market, with approximately 80% of the total gas cylinder market primarily depending on the company, whereas the remaining 20% is with its competitor LAUGFS Gas, according to Litro Chairman Gunawardana.
Multiple attempts to contact LAUGFS Gas regarding the matter proved futile.
An economic perspective
Commenting on the economic implications of the LPG situation, University of Peradeniya (UOP) Department of Economics and Statistics Senior Professor Ananda Jayawickreme stated that LPG had become one of the most important energy sources in Sri Lankan households, particularly in urban areas and suburban areas.
“Failure to provide LPG for consumers will make it difficult to meet their day-to-day needs as it is the main energy source for cooking, not only in urban areas but in rural areas too,” he said, adding that alternatives like firewood were becoming impractical and switching to electricity would incur additional costs with electricity bills and purchasing electric cooking appliances.
Prof. Jayawickreme emphasised the insufficient investment in infrastructure including storage as a key vulnerability in the expansion of Sri Lanka’s LPG industry. “The LPG market is expanding with the arrival of more people into cities and those in rural areas are shifting from firewood to LPG for cooking. It is also the cheapest and most reasonable energy source for cooking,” he stressed.
According to him, relying on storage facilities designed decades ago is not sustainable and the Government must ensure that both public and private sector companies contribute adequately in preventing supply shortages and other disruptions to support this expansion.
Prof. Jayawickreme also noted that Sri Lanka’s LPG market was a duopoly dominated by Litro Gas and LAUGFS Gas, which constricted consumer options. He further criticised the inability to interchange cylinders between the two companies under critical circumstances like shortages, leaving people vulnerable in meeting their food requirements. “The Government should stop with the blame game and play a better and more active role in regulating and maintaining adequate supply. It should start expanding storage facilities at least now,” he added.
Prolonged shortages would only lead to significant economic vulnerabilities, he said, noting that if households that could afford it shifted to electricity for cooking, it would only increase demand and generational costs of electricity, which depends on imported resources, compromising the country’s dollar reserves. “At the same time, these shortages could create black markets, forcing desperate consumers to pay inflated prices. With inflation rising, peoples’ living standards will decline,” he pointed out.
Prof. Jayawickreme further emphasised the need for strong Government oversight in the LPG market, which has only a few suppliers, in order to protect consumers and maintain market stability.