• Stock to be maintained at CPSTL tanks

 The Government, in a move to ensure that a repeat of last year’s energy security crisis does not take place, has included in the contracts of the petroleum market’s new players a clause which states that the suppliers shall, at all times, ensure the maintenance of buffer stocks equivalent to a one-month market requirement, The Sunday Morning learns.

Sources close to the matter told The Sunday Morning that the Government was keen to ensure that the fuel shortages and energy crisis which crippled Sri Lanka last year would not occur again and to have contingency measures in place to mitigate the impact of future supply chain disruptions.

The clause is included in the long-term contract for importation, storage, distribution, and sale of petroleum products in Sri Lanka, signed between the Government and the global petroleum giant Sinopec last month.

“The suppliers shall at all times ensure the maintenance of adequate buffer stocks within Sri Lanka, which shall be equivalent to its one-month market requirement of the petroleum products for the distribution dealer network, estimated based on the available average of quantity of sales of the previous three months and notified by the stock review committee,” reads Clause 13(c) of the agreement as seen by The Sunday Morning.

The suppliers should maintain the required stocks either in the storage tanks belonging to Ceylon Petroleum Storage Terminals Limited (CPSTL) as agreed with the CPSTL with the identified fuel stations or in their own storage tanks, it is learnt. 

Furthermore, the selected suppliers are allowed to place periodical international forward orders and continue similar ordering processes on a revolving basis to meet the required minimum projected quantity of petroleum products agreed with the Ministry of Power and Energy (MOPE).

“The quantity of petroleum products that shall be imported by the elected supplier for the first 12 months commencing from the commencement date as set out in the attachment 7 to the agreement is 147,237,281 litres of octane 92 petrol; 177,539,856 litres of 500 ppm diesel; 17,409,150 litres of kerosene; 23,522,400 octane 95 petrol; and 11,236,209 of 10 ppm diesel, which is subjected to any amendments as mutually agreed by the selected supplier and the Ministry of Power and Energy from time to time,” it is stated.

According to the agreement, the Ministry of Power and Energy will review the import data of the suppliers, including the quantity of actual importation, storage, distribution, and sale of petroleum products by the elected supplier within the distribution dealer network weekly or any other period agreed upon by the parties.

“The suppliers shall ensure that its fair trading practices comply with the ceiling price and the floor price published by the MOPE based on the cost reflective pricing formula and safety requirements and petroleum product specifications by relevant CPC, JIG, DEF, and ISO 8217 specifications according to the ASTM, ISO, IP, and UOP international validated test methods,” it is stated.

Furthermore, based on the agreement, suppliers will not be permitted to repatriate procurement costs of any shipment of petroleum products supplied under the contract within 12 months from the commercial operation date.

“In respect of any shipment of petroleum products dispatched and delivered to the infrastructure facilities during the 12 months from the commercial operation date, the selected supplier shall only be entitled to repatriate the procurement costs of such shipment which is the total custom declaration value after expiry of 12 months from the dispatch date of such shipment and the amount of repatriation shall not exceed the total custom declaration value of such shipment,” the agreement states.

Over the past month, Sri Lanka signed two agreements with Sinopec and RM Parks in collaboration with Shell.

However, there is no clarity on when Sri Lanka will enter into an agreement with the third company which was shortlisted and approved by the Cabinet of Ministers – United Petroleum Ltd. of Australia.

All three new players are expected to take control of 150 existing petrol stations each and use CPC and CPSTL facilities to store and distribute fuel across the island.