Proper Foreign Investment Opportunity to Produce Fuel in the Country

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Due to some global political and economic developments, in particular, the crisis that unfolded as a result of the Russia-Ukraine war, the global energy market has been facing many challenges, which caused an unprecedented surge in the price of oil, gas, and energy carriers and brought its price to the highest level in the last seven years. Today, international organisations predict that the oil price has the potential to increase up to USD 200 per barrel, although the Russian Ministry of Energy does not perceive an increase of up to USD 300 as unreasonable.

These fluctuations in the energy market have become a serious challenge, especially for developing countries, many of these countries have faced the highest rise in fuel price. Besides, some of the low-income countries have lost the ability to supply the fuel needed, to a significant extent. Among them, Sri Lanka, which is experiencing its worst ever economic crisis, has been crippled by more problems in this field.

Two years ago, the Island was in need of about USD 200 million per month to import its fuel needs, but now this figure has increased to about USD 500-600 million. Even if the global fuel price had not seen significant changes, Sri Lanka would have faced many challenges to secure USD 200 million due to severe economic problems and the lack of sufficient foreign exchange resources. Now, it is facing a much deeper crisis. However, this crisis is perhaps an opportunity to review Sri Lanka’s fuel strategy.

At present, Sapugaskanda Refinery is the single largest refinery of Sri Lanka, which was put into operation in 1969 on a land of about 70 hectares. The nominal capacity of this refinery is 50,000 barrels per day, but due to various reasons, including wear and tear, lack of timely handling, and changing its feed from Iranian oil to other oils, its capacity has presently been reduced to a maximum of 35,000 barrels per day. On the other hand, this refinery does not have the capacity to produce 95 Octane Petrol and Super Diesel. Also, due to the impossibility of importing oil, it has been temporarily closed, but the Government is obliged to pay the salaries of its employees. This issue causes the Government to be forced to import finished products, that is, petrol, diesel, and other oil derivatives, and pay far more costs in this regard. 

Therefore, one of the main priorities of the country should be the reconstruction of this refinery and its development in the first place, and in the next stage, the construction of a new refinery. But is it practical given the economic situation of Sri Lanka? Is renovating the refinery and modernising it among the Government’s priorities? Though the Government officials, especially the Ministry of Energy, should give answers to these questions, it seems that at least in the medium term, the answers to these questions will be negative.

Now, proper solutions should be introduced to reduce the fuel crisis in Sri Lanka according to the global trend of the energy market and the actual needs of this country, actions that will make the people of Sri Lanka no longer see long queues at petrol stations, people dying in these queues, and many other problems caused by the lack of fuel in the country. Perhaps the answer to this question can be found in President Ranil Wickremesinghe’s speech in Parliament on 3 August and the very important topic of foreign direct investment, an idea that can definitely be the key to the country’s development.

In the field of energy, it seems that many countries, mainly oil-rich countries, are ready to rebuild this refinery, provided that they receive concessions in this field. At present, many refineries in developed countries are run by multinationals and why not follow the same approach in Sri Lanka?

Certainly, many countries and companies are willing to take over this refinery, renovate, equip, and modernise it, so that by implementing its refining capacity of 50 thousand barrels, an important part of the Island’s needs for petrol, diesel, and fuel oil will be provided. However, as it does not seem that the Government has the ability to invest in this field, attracting foreign investment will definitely be a more logical decision. Attracting foreign investment using modern technologies has the ability to increase the capacity of this refinery even to 100,000 barrels per day in the present location and increase its productivity and upgrade the manufactured products, which will both increase job opportunities for Sri Lankan workers and increase some products and even exports to countries in the region.

By a Special Correspondent