Sri Lanka’s cooking gas supply for the festive season appears secure, even if one of the country’s two suppliers fails to deliver a single tonne. The fuel market has no such cushion. The State-owned Ceylon Petroleum Corporation (CPC) is now supplying most of the country’s diesel, and the Government is waiting on three private retailers to keep a promise to restore normal supplies.
Litro Gas Chairman Channa Gunawardana told The Sunday Morning that the company had ordered about 44,000 MT of Liquefied Petroleum Gas (LPG), the fuel used in household cooking cylinders, for December.
That is more than his estimate of the country’s entire monthly requirement, which he put at about 40,000 MT even after including every customer of rival LAUGFS Gas. “We have planned December assuming there is no gas from LAUGFS,” he said.
Energy Minister Anura Karunathilaka told The Sunday Morning that Lanka IOC, China’s Sinopec, and US-based RM Parks had agreed to supply the market without disruption and were expected to confirm this within one to two weeks. The Government’s own fallback, new CPC outlets in areas without State-run sheds, would take at least three to four months, he said.
Two shortages, two different causes
The gas and fuel queues arrived together, but they have little else in common.
The gas squeeze began around September, when LAUGFS customers started struggling to find cylinders. The market is small and concentrated.
According to Cabinet Spokesperson Dr. Nalinda Jayatissa, the country needs about 38,000 MT of LPG a month, of which Litro normally supplies about 32,000 MT and LAUGFS about 6,000 MT. Almost all of it is imported, with market estimates placing the share at close to 95%, so a single disrupted supplier is felt in kitchens within weeks.
Fuel queues returned in early October, after Lanka IOC, Sinopec, and RM Parks reduced the volumes they released to filling stations. The Government’s explanation is that the companies were losing money selling at prevailing domestic prices after international prices climbed. The cuts fell hardest on diesel, the fuel that keeps buses, lorries, and much of industry running.
Sinopec also reduced releases of 92 octane petrol by 30%, according to the Government. The CPC has absorbed the difference, raising its daily diesel issues from 3,074 MT to 3,900 MT, which the Government says has lifted its share of the diesel market from about 54% to 82%.
Officials maintain there is no national shortage, attributing the queues to reduced private releases, distribution bottlenecks, and panic buying, and a diesel subsidy reported at Rs. 41 billion has been announced for the three months to December.
Litro takes up the slack
On the gas side, the weight has shifted squarely onto Litro. The company supplied about 40,000 MT in October, against roughly 33,000 MT in a usual month, and lifted daily distribution from about 1,100 MT to 1,600 MT, or some 90,000–100,000 cylinders a day. Four vessels carrying a combined 15,600 MT arrived between 18 October and 1 November.
The extra volume had pushed up procurement costs, Gunawardana confirmed, and Litro has placed larger orders for November and December as a result. The December order is built to hold even in the worst case. “Even if we take on the entire LAUGFS demand, it will be about 40,000,” he said.
Large commercial buyers have already crossed over, supplied in bulk by bowser. “There are industries, like tile factories and hotels buying gas from LAUGFS. We now supply that segment directly,” Gunawardana said, recalling that Litro had stepped in when Shangri-La ran out of gas for its apartments.
The yellow cylinder problem
Households are harder to reach. Litro cannot refill LAUGFS’s yellow domestic cylinders, which belong to its rival and fall under separate safety and commercial arrangements, so its December stock does not automatically flow to those families.
“We can’t directly fill their domestic cylinders, so we are looking for a solution,” Gunawardana said, expecting an answer by Tuesday or Wednesday this week. “We will not be filling their cylinders. We will find a different solution.”
Discussions have centred on supplying Litro’s own cylinders to LAUGFS households.
A terminal caught in a re-export rule
The irony of LAUGFS’s position is that it owns the country’s biggest gas tank. Its subsidiary, LAUGFS Terminals Limited (LTL), spent $ 65 million on a Hambantota terminal that opened in 2019, with 30,000 MT of storage, enough to hold about three-quarters of the country’s monthly needs.
The terminal was built under the Board of Investment (BOI) Commercial Hub framework, which grants duty concessions to businesses that import goods for storage and onward export. Under its rules, the gas LTL may sell locally is tied to 40% of the value of its annual re-exports: the more it ships out, the more it may sell at home.
When the pandemic, economic crisis, foreign exchange shortages, and sovereign credit rating downgrades choked those re-exports, the terminal’s room to serve local customers shrank with them. A temporary reprieve granted under emergency regulations ended when those regulations lapsed.
The company, in a statement, described its wider troubles, including the Middle East conflict and disruption to shipping through the Strait of Hormuz, as largely beyond its control. LTL has sought three months of temporary permission to supply the domestic market from Hambantota while it exits the Commercial Hub scheme and begins paying the applicable duties and taxes.
LAUGFS said that the BOI Chairman had written to the Secretary to the Treasury, on the President’s instructions, requesting approvals within a week, and that those approvals remained pending.
The Government frames the position differently. Trade Minister Wasantha Samarasinghe has said that a letter was issued allowing LAUGFS to distribute all of its Hambantota stock domestically, on condition that it repays the tax concessions granted for the terminal’s construction.
Three ships, one clear path
LAUGFS has scheduled three cargoes for November, two of which require authorisation before their gas can be sold locally.
All three dates remain subject to shipping and port operations. Looking further ahead, LAUGFS has called a tender for direct deliveries to Colombo from January 2027, bypassing Hambantota.
It also stated that neither LAUGFS Gas nor LTL was designated by the US Treasury’s Office of Foreign Assets Control (OFAC), the agency that administers American sanctions.
Fuel: A promise and a wait
The Government’s levers on fuel are limited in the short run. Asked whether it could guarantee supplies if private operators fell short, Minister Karunathilaka pointed to the planned CPC outlets but cautioned against expecting them soon.
“We have to find the locations and the right operators, and that may take another three or four months at least,” he said. The existing agreements with the retailers contained no provision for imposing new conditions, he added, and the Attorney General’s advice had not been sought. “They promised us, so we are waiting for their response.”
Lanka IOC, the local arm of India’s Indian Oil Corporation Ltd., describes its own supply as steady.
“At Lanka IOC, we have not had any major restrictions on supply,” Managing Director K. Raghu said in written responses to The Sunday Morning, noting that petrol sales had risen 6% last month, led by its premium 95 octane petrol. On diesel, he said deliveries were matched to QR code-based fuel quota usage “to prevent any diversion to industries, the idea being to deliver fuel to retail customers”.
The company had received no formal notices and remained within its licence conditions, Raghu said, but had formally raised its concerns with the Government.
“The Government has been very receptive, and we expect it to take a positive view. We expect further clarity in the next few days,” he said, adding that stocks were adequate and more cargoes were due.
President Anura Kumara Dissanayake has said that existing fuel storage covers only 23–25 days of demand and has announced projects to raise that to at least 45 days.
For now, the outlook splits in two. Gas for the festive season rests on Litro’s stockpile, a cylinder arrangement still being finalised, and LAUGFS’s November ships; fuel rests on the CPC’s stretched supply lines and on three private companies keeping a promise the Government says it has no contractual means to enforce.
Causes for gas and fuel shortages
Cooking gas (LPG)
Petrol and diesel
Trigger
LAUGFS unable to maintain normal domestic supply
Private retailers cut releases to filling stations
Underlying cause
Shipping disruption and a re-export condition on LAUGFS’s Hambantota terminal
Losses at regulated pump prices after global costs rose
Who is filling the gap
Litro
CPC
Compiled from Government, company, and media reports
Litro’s December order exceeds its own estimate of national demand
LAUGFS’s scheduled cargoes for November 2026
Supplier
Arrival port
Expected arrival
OQT
Hambantota
12–14 Nov.
Geogas
Colombo
15–17 Nov.
OQT
Hambantota
24–28 Nov.
(Source: LAUGFS Gas PLC media release)