Tuesday, December 5, 2023

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Bitter truth about LP Gas market in Sri Lanka

Litro Gas, Sri Lanka’s leading gas vendor has launched an emergency procurement process to end a gas shortage in the midst of heated arguments and challenges regarding the country’s LP gas market. In this context, local gas mafiamen and dealers have been carrying out various propaganda campaigns as well, but the media is contributing to a lot of research in this regard given that it is important to disclose what is really going on in the Sri Lankan LP gas market.

We should be looking into the basis in which Sri Lanka purchases gas from the international market. This is recognised internationally as the CIF, i.e. Cost, Insurance and Freight. These contribute to the cost of production, insurance premiums and shipping costs, and the price can only be changed via Freight due to the influence of the Sri Lankan vendor or the procurement procedure.

The Cost of gas production is set by the Saudi Arabian company known as Saudi Aramco. These may be subject to constant ups and downs and hence cannot be influenced by the countries that purchase gas. That being said, the price of LP gas determined by Saudi Aramco cannot be changed by influencing anyone else in any way. For example, Opec sets crude oil prices, and Saudi Aramco sets international LP gas prices.

On the condition of insurance, these too operate according to international standards and therefore cannot be influenced by vendors who purchase them. Although this is a principled interpretation of how the gas market operates, Sri Lanka cannot purchase gas without that basis. 

Over the past two years, Litro has been selecting Oman Trading Gas (OQ Trading) as its Freight gas supplier, on a procurement basis, receiving US$105.40 for supplying a metric tonne of gas. By 28/02/2022, the tender was due on expiration. Theshara Jayasinghe, the current Chairperson of Litro, stated that he wished to purchase gas for a lesser price than what the company offered. However, the Oman Trading Gas Company (OQ Trading) continued to be pressured by the gas mafia to obtain gas only from the same company.

This invisible cat’s paw acted on behalf of the company, which stretched itself to collect dollars behind the curtain. On many occasions, the gas mafia in Sri Lanka interfered with the management of Litro to delay the tender, which was to be obtained after 22/02/2022, paving the way for Oman Trading Gas to supply gas in a lucrative deal.

Litro in June, 2021 prepared a new tender, against which a company called Siyolit was set up for the procurement process through a Cabinet sub-committee, and Trade Minister Bandula Gunawardena informed Litro on 27/06/2021 to ensure that this is turned into a reality. During that time, we pointed out that Siyolit was an illegal company. When Litro employees, intellectuals and political parties pointed out the fraudulent nature of Siyolit, the company was disbanded by then Secretary to the President P.B. Jayasundara. Until the decision was implemented on 28/10/2021, this invisible squad had delayed the procurement process at Litro for five months.

In October 2021, the number procurement procedure for Litro was reactivated. During that time, the Sri Lankan gas market was hit with a storm of incidents including misidentified gas explosions, creating confusion in the market. Officials of the Sri Lanka Standards Institute (SLSI) introduced a new gas composition on 16/12/2021 amidst conflicting opinions, but delayed its implementation due to unseen forces.

This delay was aimed at deliberately delaying the technical specification of the gas composition required by Litro for its procurement procedure. This invisible paw, which seeks the control of the gas market in Sri Lanka, directly plugged itself into it via corrupt officials. In the backdrop, the procurement procedure at Litro was further dragged in.

At this point, Litro was at risk of not being able to obtain gas after February 2022 due to delays in the procurement process. The Management of Litro wrote to the Secretary to the Ministry of Finance Attygala on 28/12/2021 requesting approval to obtain gas under an emergency procurement process for a period of about three months until the main tender is activated, in order to prevent any gas shortage in the country, given that it would consume some time for the main procurement process.

Later, it was informed via a letter that Susantha Athula Kumara, Director General of the Department of Public Enterprises, considered the proposal on 05/01/2022, and authorised Litro and its Management to conduct an emergency procurement process in order to prevent a gas shortage in the country.

On 05/01/2022 Litro announced the Emergency Purchase Tender through a newspaper advertisement and it was also publicised via the Ministry of External Affairs and the embassies given that it was an international affair. Despite the pressure exerted by the invisible paw trying to take control of the Sri Lankan gas markt, six international companies came forward to bid for the tender.

Surprisingly, Oman Trading (OQ Trading), a former supplier of gas to Litro, offered US$145 for the tender, a higher price than what Litro was previously offered (US$105.40).

SHV, the lowest bidder out of the six international companies that came forward, was selected by Litro’s technical committee as its temporary freight gas supplier at a very low price of US$ 97.88 per metric tonne of gas. Founded in 1896 in the Netherlands, SHV is one of the world’s largest gas suppliers and its entry into the Sri Lankan market is unarguably an economic achievement for the island nation.

Oman Trading (OQ Trading) previously supplied gas to Litro at a price of US$105.40. According to industrial sources, Litro would have gained an additional profit of Rs. 92 million on the purchase of 60,000 metric tonnes of gas over the next few months under the new prices.

The media tends to hail this situation as an opportunity for Litro, a national company, to achieve a victory for the people of Sri Lanka amidst the ongoing pressure. But the invisible paw that targets the control of the Sri Lankan gas market has not stopped its influences, where we learned that a number of conspiracies are being hatched to take over the main gas tender in the future.

We will be paying a close watch on the future of the gas market in Sri Lanka and need we remind you that we will not hesitate to divulge any form of notoriety on the way.

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