The Hindu : India, Sri Lanka to move closer in petroleum sector

Online edition of India's National Newspaper
Thursday, Dec 19, 2002

International

International

India, Sri Lanka to move closer in petroleum sector

By V.S. Sambandan

COLOMBO. DEC. 18. India and Sri Lanka are set to move closer in the crucial area of energy security, with plans on to build an oil pipeline linking the two neighbours. The proposal, still in its early stages, is to develop an offshoot from the proposed pipeline between Chennai and Madurai to reach Colombo, M. Nageswaran, managing director of the Lanka IOC (LIOC), a wholly owned subsidiary of the Indian Oil (IOC) said here today.

The pipeline proposal is a significant to the energy security of the island. A net importer of petroleum products, Sri Lanka has already agreed to lease its Oil Tank Farm in eastern Trincomalee to be operated by the LIOC. The tie-up in the petroleum sector is also a pointer to the changing nature of bilateral relations, with a greater emphasis on furthering economic links.

The World War II vintage Trincomalee Oil Tank Farm, with 99 tanks, each with a capacity of 12,250 kilolitres, was considered to be of strategic importance even during the decades of the Cold War.

However, with the changing geopolitics and rapid advances in military hardware, its strategic significance may not be the same as it was in earlier decades; but its continued importance for the island and the region cannot be underestimated. Moreover, the heavy correlation between energy and international affairs adds to the importance of the IOC's role in Sri Lanka in bilateral relations.

Earlier, this year when the two countries agreed on the 35-year lease for the Oil Farm, there was no adverse reaction in the island from any section, including the one-time India critic, the left-radical Janatha Vimukthi Peramuna.

For Sri Lanka, the Indian presence in Trincomalee is seen as a part of its international safety net in its present peace process with the Tigers. The Government, however, has publicly maintained that it was a commercial decision.

The leasing of the farm is an extension of the 1987 Indo-Sri Lanka Accord under which the two Governments agreed that the "work of restoring and operating the Trincomalee Oil Tank Farm would be undertaken as a joint venture between India and Sri Lanka.''

``Currently only 15 of the 99 tanks are operational,'' Mr. Nageswaran said, adding that the LIOC "plans to develop the China Bay Tankages (in eastern Sri Lanka) on a need basis as the volume of operations in Sri Lanka grow.''

In addition to the Trincomalee Oil Farm, the IOC's involvement in the island's energy security will be in two terminals under construction at Muthurajawela and Katunayake International Airport, through a joint venture with the Ceylon Petroleum Corporation.

Indian Oil petrol stations

The LIOC was all set to enter retail business in Sri Lanka and would initially take over 100 petrol stations in the island, Mr. Nageswaran said. This would be followed by another 150 petrol stations in the second phase.

Compared to the 9,423 retail petrol outlets run by the IOC in India, Sri Lanka has 1,064 petrol stations. Colombo, the island's largest city, has 48 outlets, of which 13 will be operated by the LIOC in the first phase.

In addition to the IOC's initial investment of $62 million for the first phase, $38 million would be invested in the second phase, making it one of the largest Indian investments in the island.

In its retail business, the LIOC would provide the entire range of petroleum products, including Aviation Fuel, LPG and all grades of lubricants and fuel, Mr. Nageswaran said.

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