Loss of vital byproducts of refinery having devastating impact on other sectors: FSP

By Rathindra Kuruwita

Byproducts of the Sapugaskanda oil refinery such as furnace oil, jet fuel, kerosene and naphtha are vital for many Sri Lankan industries and its shutdown will have a devastating impact on various sectors, Frontline Socialist Party’s (FSP) Education Secretary, Pubudu Jayagoda says.

Jayagoda said Minister of Energy Udaya Gammanpila had stated that importing refined petrol and diesel was much more economical than purchasing crude oil.

“We do not have crude oil because the country doesn’t have dollars. The CPC floated over five tenders and there were no international sellers who wanted to supply us crude. In fact, sellers had not responded to the coal tenders floated by Sri Lanka and this might lead to a power shortage at the beginning of next year,” he said.

The Ceylon Electricity Board (CEB) has been able to generate a significant portion of electricity with hydropower because of heavy rains, he said adding that by January 2022, the people might have to experience several hours of power cuts, Jayagoda said.

“Sri Lanka spent a significant amount of money on oil imports. In 2019, when a barrel of crude oil was selling at around USD 69, we spent about USD 3.67 billion to import oil. In 2020, we spent about USD 2.32 billion because the price of a barrel of crude oil dropped to about USD 45. Right now the price of a barrel of crude oil is about USD 80, and we will spend about USD 4 billion this year. There are some who believe that the price of a barrel will go up to USD 120 by the end of 2022,” he said.

Jayagoda added that while Sri Lanka had no control over world crude oil prices, there were several ways that the CPC could improve the situation through long-term planning. In 2020, there was a significant drop in oil prices and Sri Lanka could have kept a buffer stock, he said. There are oil storage tanks in Muthurajawela and Trincomalee. However, instead of renovating the tanks in Trincomalee, the government is planning to sell them, he said.

“Fifteen oil tanks in Trincomalee have been given to Indian Oil Corporation (IOC) on lease. However, the agreement expires at the end of the year, and we can take them back. However, the government not only plans to give them back to the IOC, but they are planning to place over 70 tanks under a company that India has a majority stake in. An understanding was reached on this during the recent visit by the Indian Foreign Secretary. The ‘talks’ were so successful that the Indian delegation took some photos opposite the tanks,” Jayagoda said.

The FSP Education Secretary said that the Sapugaskanda Oil Refinery had not been expanded since its inception. Even without any funds to develop its infrastructure, the refinery played a significant role in supporting many industries, he said.

“So, around 60% are byproducts of refining are furnace oil, black oil, jet fuel, kerosene and naphtha. The CPC makes a lot of money by selling them. By mid-1990s, the CPC had been able to pay for its crude oil imports by selling the byproducts. However, successive governments have ruined this sources income. The fact that the CPC still makes money from them shows that there are cash cows,” he said.

Jayagoda said that ultimately the government would end up spending more dollars importing furnace oil, jet fuel, kerosene, and naphtha. This is akin to the disaster created by banning the import of urea, he said. Although the government saved some money by bringing a halt to import of urea, it spent a large amount of dollars importing compost, potassium, and nitrogen.

“A number of state and private companies depend on the byproducts of refining. Earlier the CEB bought black and furnace oil from the CPC. Now, it’s planning to import them. We will probably do the same with kerosene, naphtha and jet fuel. The question is whether we have dollars? If the CEB can’t purchase these products that will affect the production of 200 MWs of electricity,” Jagoda said.