Tuesday, June 18, 2024

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China’s Sinopec to start operations in Sept bringing down fuel price 

By: Staff Writer

Colombo (LNW): Chinese oil major Sinopec expects to start operations in Sri Lanka on Sept. 20 and will be allowed to sell fuel for less than the maximum retail price set by the government, Sri Lanka’s Power Minister said.

Sinopec’s entry into Sri Lanka will help reduce pressure on Sri Lanka’s foreign exchange reserves, and the island nation expects two other international fuel operators to start operations by October and November, Kanchana Wijesekera said.

“Reducing pressure on our foreign exchange with Sinopec’s entry will also help us increase fuel imports and strengthen the economy,” Wijesekera told reporters.

Australia’s United Petroleum and U.S. firm RM Parks in collaboration with Shell are the other two companies that have received approval.

The entry of the new players will end a market duopoly of state-run Ceylon Petroleum Corp and Lanka IOC, a unit of Indian Oil Corp.

Under the new deal, the Chinese firm will be given a 20-year licence to operate 150 fuel stations and will also be able to invest in 50 new fuel stations.

Sri Lanka is grappling with its worst financial crisis since independence from the British in 1948 with reserves at $3.8 billion at the end of July.

The island’s economy was severely hit last year by spiralling energy costs worsened by the war in Ukraine, which caused long lines at fuel stations and hours-long power cuts.

“Sinopec and Vitol have also been shortlisted for a refinery project in southern Sri Lanka and we expect their request for proposals to be handed over at the end of August,” Wijesekera added.

The entry of the new players will end a market duopoly of state-run Ceylon Petroleum Corp and Lanka IOC, a unit of Indian Oil Corp.

The Board of Investment (BOI) recently clarified that no tax concession has been granted to China’s energy investor in Sri Lanka, Sinopec, in terms of the BOI law.

BOI top official said: “BOI can only give exemptions from Customs duties under the prevailing Inland Revenue Act. If any concession is to be given, it should be under this. This agreement does not provide any exemption from taxes.”

He added that no exemption from Inland Revenue laws was given in any BOI agreement. “The prevailing law applies. The present agreement is to set up fuel stations in terms of the approval granted by the Ministry of Power and Energy.

The BOI had given approval after it secured approval from the Ministry of Power and Energy. “In terms of that approval, we have granted BOI status. No tax exemptions will be given and the BOI doesn’t have power to do so,” she explained.

The BOI and Sinopec Energy Lanka signed an agreement to operate and establish filling stations for fuel distribution in Sri Lanka. Sinopec has invested $ 100 million into the project, which includes import, storage, and sale of fuel.

The project will involve 150 privately-owned fuel outlets currently operated by the Ceylon Petroleum Corporation (CPC). Additionally, 50 new fuel stations will be established, the BOI said in a statement.

The agreement allows the project to operate for 20 years under the oversight of Sinopec Energy Lanka, in accordance with the Sri Lanka Board of Investment Act. Sinopec will sell various petroleum products, including octane 92 and 95 petrol, 500 PPM diesel, 10 PPM diesel, petroleum jet fuel, and other diesel and petroleum products.

Further, the agreement will facilitate the provision of value-added services at the stations such as automatic car washing and car service facilities, department stores, convenience stores, internet cafes, automated teller machines, and food courts.

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