Energy Minister Udaya Gammanpila said yesterday (4) that the Trincomalee Oil Tank Development Complex Project was approved by the Cabinet of Ministers on Monday (3) and that the agreement pertaining to this development will be signed with India within a week.
“The initial agreement in 1987 with India was for India and Sri Lanka to develop and maintain the tanks together. In 2003, 99 tanks were leased to India for 35 years. In 2017, an agreement was reached with India to lease the 99 tanks to India for 99 years. As per yesterday’s (3) cabinet approval, Sri Lanka is first getting these tanks back to the Government and through three lease agreements, 24 tanks will be given to the Ceylon Petroleum Corporation (CPC), 14 tanks will be given to the Lanka Indian Oil Corporation (LIOC), and 61 tanks will be given to a mutual business interest between CPC and LIOC for 50 years. This agreement will be signed in a week or so, after we finalise a date,” Gammanpila said at the cabinet decisions press briefing yesterday.
Thus, Gammanpila said that the mutual business interest between the CPC and the LIOC is a subsidiary, in which 49% of the shares will be given to the LIOC.
“But majority stakes and power will remain with the CPC. The Chairperson will also be appointed by the CPC,” added Gammanpila.
The cabinet decisions released yesterday stated that the new subsidiary will be “Trinco Petroleum Terminal (Pvt.) Ltd.”.
The Trincomalee Oil Tank Farm, built by the British as a refuelling station during World War II, is located on 850 acres of land and originally contained 101 tanks, each with the capacity to hold 12,100 metric tonnes (MT) of oil.
Out of the original 101 tanks, two have been destroyed by a kamikaze attack during the Japanese air raid on Trincomalee on 9 April 1942 and when a Royal Ceylon Air Force plane crashed in the early 1960s.
LIOC acquired a one-third stake in Ceylon Petroleum Storage Terminals Ltd., which operated the Trincomalee Oil Tank Farm in 2003.
Subsequently, the LIOC entered into a Memorandum of Understanding (MoU) with the CPC for a 35-year lease to operate 32 of the 99 oil tanks for an annual payment of $ 100,000. However, parties were unable to finalise this 35-year lease due to strong opposition by trade unions and political parties.
During Finance Minister Basil Rajapaksa’s visit to India last month, he had reportedly initiated a fresh round of talks with India and the LIOC, where India had offered support to Sri Lanka on four pillars including the early modernisation of the Trincomalee Oil Tank Farm.
Due to Sri Lanka’s current foreign reserve crisis, the country has sought financial assistance from India in the form of a $ 400 million currency swap to help Sri Lanka address the existing balance of payment (BOP) issues; a $ 1 billion line of credit to cover the import of food, medicines, and other essential items from India to Sri Lanka; and a $ 500 million line of credit to cover the importation of fuel from India.
It is being widely alleged that the granting of such financial assistance by India will be contingent on the Government’s support of this joint development of the Trincomalee Oil Tank Farm by LIOC and CPC.
However, such allegations were denied by Gammanpila in his interview with The Hindu, where he claimed: “Some including the political opposition are suggesting that India’s economic assistance is tied to the Trincomalee deal. I vehemently deny that. We began negotiating this agreement well before the economic assistance was sought; there is no connection whatsoever.”