Sri Lanka plans 100,000 b/d refinery to cut reliance on imports

Singapore (Platts)--27Oct2005

Sri Lanka's long-drawn plan to build a second refinery and lower reliance
on imported oil got a fresh impetus last week after cabinet approved the
project. 
     The government now aims to close a deal with a foreign company to build
and operate the plant in the next two-three months, a source at state-owned
Ceylon Petroleum Corp said Thursday.
     Sri Lanka is looking to build a 100,000 b/d plant near the existing
51,000 b/d Sapugaskanda refinery on the outskirts of Colombo, the source said.
The facility will use Sapugaskanda's already-in-place infrastructure including
storage and pipeline capacity. 
     The refinery, which will take around four years to build, is expected to
cost around $795-mil and will be privately funded. Ceypetco will lift most of
the refinery's output for the domestic market, the source said.
     The source declined to identify the foreign company but local media
reports said the government was in talks with US-based Global Energy to lead
the project.
     Global Energy had first initiated talks on the project in 2002, Platts
reported earlier. The company was then optimistic about starting construction
in 2003 and have the refinery up and running in 28 months. But the project
never took off due to delays in obtaining government approval. 
     Meanwhile, doubts still linger over the new refinery. Ceypetco's trade
union earlier this week threatened to go on strike over the project. Unions
claimed the deal was unfavorable because it mandates Ceypetco to buy back 80%
of the new refinery's production at world market prices, according to local
reports. Sri Lankans currently enjoy subsidized oil prices.
     The strike was eventually averted after talks between the union and the
country's prime minister.
--Mriganka Jaipuriyar, mriganka@platts.com

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