By: Staff Writer
August 31, Colombo (LNW): Sri Lanka’s ambition to diversify and liberalise its petroleum retail sector has suffered a serious blow with the abrupt withdrawal of Australian energy giant United Petroleum—barely a year after its much-publicised entry. The exit not only undermines the Government’s reform agenda but also casts a long shadow over the country’s credibility in attracting and retaining international petroleum giants.
Ceylon Petroleum Corporation (CPC) Managing Director, Mayura Neththikumarage, confirmed that United Petroleum formally notified its decision to withdraw three months ago, citing unfavourable operational conditions and the limited scale of Sri Lanka’s market. The company ceased fuel supplies in December 2024, leaving behind 64 fuel stations, which have since reverted to CPC management.
What makes this development particularly significant is that Sri Lanka was United Petroleum’s first overseas venture beyond Australia. The firm had entered in August 2024 under a 20-year Board of Investment (BOI) licence, pledging $27.5 million to import, store, and distribute petroleum products. With much fanfare, it promised to modernise Sri Lanka’s fuel landscape by introducing convenience store models and diversifying lubricants. Today, that vision lies in tatters.
At the time of approval, the Government hailed United Petroleum’s investment as a landmark in its strategy to open up the fuel sector to foreign players. Alongside United, companies from China, the US, and India were granted 20-year licences, with hopes that their presence would break CPC’s monopoly, guarantee supply stability, and attract much-needed foreign direct investment (FDI).
But United Petroleum’s exit exposes deeper structural weaknesses. The company’s reference to “dissatisfaction with operational conditions” suggests more than market-size limitations. Industry insiders point to regulatory bottlenecks, opaque pricing mechanisms, and bureaucratic hurdles that deter global energy firms. Moreover, the political climate—where policy decisions are often reversed with each administration adds to investor uncertainty.
The implications of United Petroleum’s departure extend far beyond the loss of a single investor. It raises troubling questions about whether Sri Lanka can truly deliver a predictable, business-friendly environment for multinational petroleum companies. If operational challenges remain unaddressed, the remaining players Chinese, American, and Indian firms—may also reconsider their long-term commitments. The risk of a domino effect could unravel the entire liberalisation experiment.
For consumers, the withdrawal is equally concerning. One of the core promises of market liberalisation was competition-driven efficiency, better service, and more stable fuel supplies. With one less competitor, the market once again tilts heavily in favour of state-run CPC and Indian Oil Corporation (IOC), potentially diminishing the incentives for efficiency and innovation.
United Petroleum’s quiet but decisive exit also dents Sri Lanka’s global reputation as an investment destination. Securing the confidence of large multinational petroleum firms is not just about fuel supplies it is a signal to the world about the stability of the country’s regulatory and investment climate. If an energy major can walk away so soon after signing a 20-year deal, it sends an alarming message to prospective investors across all sectors.
As the Government scrambles to reassure stakeholders, the episode serves as a warning: without consistent policy, regulatory transparency, and genuine support for investors, Sri Lanka risks squandering opportunities to transform its fuel sector—and with it, its broader economic reform agenda.
