Third petroleum player ideally from local private sector–Minister Of Petroleum
WITH RAVI LADDUWAHETTY
Minister of Petroleum Industries Arjuna Ranatunga said on Wednesday that the ideal situation for the country would be to have a third player from the local private sector. This would also generate competition while the funds and the profits would be maintained within the country, unlike an expatriate corporate which would repatriate the funds to their respective countries.
? What is your reaction to your being shifted from the Ministry of Ports and Shipping despite the President's assurances that none of the Cabinet Ministry portfolios given to the UNP will be taken away?
A: That is very true. But, it is the President who decides who gets what. I was given the challenge of reforming the Ministry of Ports and Shipping. I ended corruption in the Port. I transformed the Port into a profit generating venture which made Rs 11 billion in profits.
During my tenure there, the container throughput also increased. I have turned the ports into viable ventures.
Possibly the President felt that there was ten times more work to be done here. I will perform to the best of my ability irrespective of whatever is entrusted to me.
? What are the biggest issues you have identified in your new Ministry?
A: We have a large number of issues and problems including the demands which have been made by the trade unions as well. There are issues in relation to petroleum imports. We import kerosene oil and sell at a subsidized price. We are a service-oriented organization and not profit oriented. Lanka IOC does not import kerosene. There are other issues such as the stupendous taxes we pay. Otherwise, we can run as a profit oriented organization. But we have to be civic conscious being a State- owned organization. We are in a classical catch 22 situation. We need to pay taxes to help meet government revenue targets. On the contrary, we cannot impose burdens on the public as well. It is after consideration of all these factors that we operate unlike in the ports where there are various commercial strategies to make profits. But, institutions such as the CEB which are service oriented, cannot make profits or at best it is difficult to make profits. But, the Government will not impose constraints on the public by increasing prices to make profits.
? What are the issues related to petrol sheds?
A: There are various indicators which are used in the allocation of petrol sheds and that have not been complied with in the past. One of the main aspects of the services that we are providing should include washrooms especially for female staff. We have given guidelines to fuel station operators to have those amenities or it would be difficult for us to let them provide these services.
? There were a certain number of petrol sheds which were supposed to be reserved for a Chinese operator – Sinopec. What is happening to those? The Unions wanted them to be given to the CPC?
A: It is my personal belief that there should be a third player to increase the competition in the field. But, the ideal situation is to have the third player from among the Sri Lankan private sector so that the money will be retained in Sri Lanka unlike in the case of a foreign player who will repatriate proceeds overseas. That process would be good. This is only an idea but the Government has not gone into any detailed plan as yet. We don't need Chinese and American and other foreign nationals operating our own fuel stations here when we could groom one of our own businesses here.
? Is there a mafia operating in fuel imports? There are 17 registered suppliers but regular tenderers are only four. Why?
A: There was such a corrupt system during the previous Government's tenure. But, we have changed that. Everybody gets a better hearing now.
? So, does everyone get a fair chance and equal opportunity now?
A: Yes. But I admit that there is a mafia that gets the tenders all the time. We have devised a strategy that allows for more participants in tenders. This is because if we reject a fuel carrying vessel on account of bad quality fuel and that vessel continues bringing substandard oil even after getting rejected before, there could be a crisis leading to power shortages because of that. So, that is why we have created new systems so that there is a wider choice of suppliers to avoid a catastrophe.
We are now planning on expanding new storage capacities in Trincomalee for which we need private sector investments. We are planning on attracting new investors and a committee has been appointed to facilitate that. We are studying the thing through. We will have to do it in collaboration with investors. The Government has no money. But, there would be a series of development plans ahead.
? Will oil exploration take place in the Mannar basin?
A: We have asked for a report from a committee and according to what we have been told, the prospects of finding oil are very good.
There are prospects of finding gas as well. The committee is talking to some investors who will be investing in the project. We will be taking some prompt decisions.
? The Sapugaskanda Refinery expansion has been a matter of great debate on public- private partnerships etc. Now Saudi Arabia is supposed to fund it. How realistic is this?
A: There have been three investors from three different countries .There will be a fourth one coming in on Wednesday. All these investors are willing to see that Sri Lanka's energy security will be positive and on a long term sustainable basis. We are negotiating this now and we will be deciding quickly as to who will be the best and the most effective of these for Sri Lanka. We can give it only to one investor and the financial commitment will be over US $ 2 Billion. The Government does not have money and we have formulated a strategy whereby these investments and projects will not be a burden to the Government or to the country.
We will be upgrading the present refinery and we will be building a new one as well so that we could get the daily requirements of petroleum from these two refineries.
? Even imports through the Colombo Port are through a very old network of pipelines. The pumping rate is around 200 tonnes an hour in Colombo where as at Hambantota it is 2000 tonnes an hour. How do you see this?
A: That is true. One of the major reasons of the thumping losses of the CPC has been this. We are mapping out a new strategy which is also aimed at laying new pipelines or even transporting the fuel by special tankers.
? The cost of demurrage paid to ships is also high due to the antiquated infrastructure that holds up work. So many plans were there but none of them was implemented. Do you think that this is fair?
A: That is true. It is because of the antiquated infrastructure that this demurrage factor and the loss factors are there and we are conducting negotiations regarding all these issues.
? There has been a lot of talk and discussions about cross-country pipeline revamping and all that but nothing has happened. Why? Don't you think that it is high time to walk the talk?
A: There are some people who think that the pipelines have to be restored so that they can strike deals! We will consult our Engineers and see what is best for the country. My philosophy is to spend only what is necessary for the country and also to get the best petroleum.
? Now on the procurement model of refined products, all the liabilities are passed on to the supplier which means that the costs are more. The CPC Commercial Division hides behind the standard guidelines of the Cabinet Appointed Procurement Committee chaired by the Home Ministry Secretary! Shouldn't these be changed?
A: We have not got any complaints in that regard and should not be listening to all the tales that are being told. If we run behind those tales, then we will have no time to do anything else. We have our teams of engineers and we should be changing them only if they are not functioning the way they should.
? How is it that there are over 100 suppliers who pay US $ 10,000 as registration fees every three years, but only about six are active and the procedures and the terms and conditions are also lopsided? These are international regional and global suppliers who don't face any nonsense in other markets. How do you reconcile this?
A: My issue is that there is a coterie of suppliers who are the only people who supply all the time. But, at the same time, they might be providing the product at the cheapest price. What we need to do is to stop this mafia. We will be taking this up at the next Board meeting as well.
? Why should customers be made to pay for the inefficiencies of the CPC which makes the CPC push the price up?
A: This is not a competency issue. The pipelines and the equipment are old. That is the reason. But, I don't know about what happened in the past. But, the staff has been very positive after we came into power.
?If you look at the Procurement Committee of Lanka IOC which does not have all these stringent procurement practices, according to international traders in Singapore, the selling prices to LIOC will be minus the premium while for the CPC, it will be plus the premium which will be plus the costs of the laboratory failures. How do you see this?
A: We always give the comforts to the public as and when we can. We reduced the fuel prices substantially.
? Almost every major international supplier has failed the test at the antiquated CPC laboratory on various parameters. These are companies which are supplying other international petroleum companies in Indonesia, Bangladesh, Singapore, Maldives and others. But CPC says that they are responsible for the energy security of Sri Lanka and disqualify them. How do you reconcile these?
A: I don't know whether there is a thing like that. I don't bring my politics to the office. The issue is that all these people have been used to such a corrupt system all these years and there are vestiges of it remaining.
? Crude products are purchased on 90 days' credit while finished products are imported on 180 days' credit. Originally, the Letters of Credit were to be opened at the time of loading the vessel or two days prior to the loading, where unlike now, the CPC requests the L/Cs to be opened only when the vessels around 5 days prior to vessel docking in Colombo. This is where the country's credibility, the country's energy sector credibility and the country's banking sector credibility all come into question. Don't you think that this should be changed in the light of getting 90 and 180 days'credit?
A: That is something that I will have to study as I have been here only for one and a half years.
? The old system of opening the Letters of Credit five days prior to the cargo being loaded onto the vessel was accepted all this time and worked well. Why is this sudden change in the light of all these being bona-fide suppliers who submit bids having registered with the CPC and whose Corporate Balance Sheets and performances are analyzed?
A: We are trying to change what was going on for the last ten years during the tenure of the previous government. We can't change these matters overnight.I will be calling for an investigation of all these aspects. It is a good thing that the media is pointing out these lapses.
? What is the earthly sense in providing bunkering services, given that Sri Lanka is a mere 5 million- tonne market and only 1.8 million tonnes are processed at Sapugaskanda while the remainder is imported which makes the costs higher ?
A: Whatever the reasons are, we are getting the business. We may be a little higher than the others but we are getting the business, but with improved performances, we should be doing better with the port expansions
? Just to prove a point. In Colombo International Furnace Oil ( IFO 380) is US $ 330 per tonne, while in Singapore, it is US $ 306 per tonne, Fujairah, it is US $ 302 per tonne, Cochin- US $ 307 per tonne and Kelang ( Malaysia) it is US $ 308 per tonne.
IFO 180 in Colombo is US $ 345 per tonne, while in Singapore, it is US $ 345 per tonne,Fujairah – US $ 340, Cochin- US $ 309 and Kelang – US $ 328.
In Marine Gas Oil, it is US $ 530 per tonne in Colombo, US $ 464 in Singapore, US $ 543 in Fujairah, US $ 655 in Cochin and US $ 490 per tonne in Kelang. How do you reconcile this?
A: We may be higher slightly now, but we will change the entire equation when the Hambantota Port will be in operation. There are 450 ships which will be passing this way and if we get four ships of that,we will be all right.
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