Sri Lanka is expected to decide on a new privately funded 100,000 barrel-per-day (bpd) refinery in weeks, the state oil firm said on Tuesday, as the government increased security over mounting war fears.
A decision on the $795 million refinery, which will operate alongside an existing 50,000-bpd plant, had been expected soon after the Nov. 17 presidential election but was delayed as officials consulted with unions, Reuters quoted the Ceylon Petroleum Corp. as saying.
“A decision has not been made on it yet,” company chairman Jaliya Medagama told Reuters. “It will be a couple of weeks. No one questions the need for a refinery, the question is how it is funded.”
The facility will take between three and five years to build once the government gives the go-ahead.
A lack of refining capacity means Sri Lanka, which produces no crude of its own, has to import some 40 percent of its oil products, adding additional costs the island can ill afford after high global crude prices pushed inflation up last year.
Sri Lanka imports 15 million barrels of crude and refined products a year, or more than 40,000 barrels daily.
Petroleum imports have risen 45 percent to almost 1.4 billion dollars for the 10 months to October due to high oil prices, according to the central bank.
The proposed refinery would be funded by both local and international investment through U.S. firm Global Energy, Medagama said, with the government promising to buy a yet-to-be-specified percentage of its output.
Unions had objected to elements in the funding plan, Medagama said, although he did not give further details. Foreign investors were becoming jumpy over the delayed decision, he added.
“It is natural,” he said. “Any investor would be concerned when there is no decision.”
The government had bolstered security around its existing installations including the Sapugaskanda refinery in recent weeks as tensions with the Liberation Tigers of Tamil Eelam (LTTE) mount after a string of attacks on troops in the Tamil-dominated north and east.
The Tigers had attacked oil installations until two decades of conflict was halted by a ceasefire in 2002, he said, including a raid on storage tanks in the capital Colombo. Many now fear a return to war if peace talks remain stalled.
Earlier this month Sri Lanka raised a 100-million-dollar loan from foreign banks to help pay hefty oil import bills, which threaten to blow a hole in the country’s balance of payments, the Central Bank said last Wednesday.
“The loan proceeds will also help to further stabilise domestic interest rates since these funds are raised from the international market,” the central bank said in a statement on the three-year syndicated loan arranged by Citigroup.
It comes after Sri Lanka got its maiden sovereign rating last month, a first step in tapping the international bond market for loans. Two international rating agencies — Fitch Ratings and Standard and Poor’s — assigned speculative ratings to the country.
Fitch gave the nation a BB- rating while Standard and Poor’s awarded an even lower B+ sovereign rating.
Despite the “junk bond” status, President Mahinda Rajapakse said the ratings marked a “respectable beginning (in) the universe of rated sovereigns.”
The island nation is anxious for cash to meet its rising oil import bill and tsunami-related reconstruction costs that have strained finances.
Both rating agencies said the country’s credit worthiness was affected by the absence of a permanent peace accord with the Tamil Tigers, who control much of the island’s north and east.
“We have taken all precautions,” he said. “For strategic reasons I cannot say more other than that security has been tightened.”
A decision on the $795 million refinery, which will operate alongside an existing 50,000-bpd plant, had been expected soon after the Nov. 17 presidential election but was delayed as officials consulted with unions, Reuters quoted the Ceylon Petroleum Corp. as saying.
“A decision has not been made on it yet,” company chairman Jaliya Medagama told Reuters. “It will be a couple of weeks. No one questions the need for a refinery, the question is how it is funded.”
The facility will take between three and five years to build once the government gives the go-ahead.
A lack of refining capacity means Sri Lanka, which produces no crude of its own, has to import some 40 percent of its oil products, adding additional costs the island can ill afford after high global crude prices pushed inflation up last year.
Sri Lanka imports 15 million barrels of crude and refined products a year, or more than 40,000 barrels daily.
Petroleum imports have risen 45 percent to almost 1.4 billion dollars for the 10 months to October due to high oil prices, according to the central bank.
The proposed refinery would be funded by both local and international investment through U.S. firm Global Energy, Medagama said, with the government promising to buy a yet-to-be-specified percentage of its output.
Unions had objected to elements in the funding plan, Medagama said, although he did not give further details. Foreign investors were becoming jumpy over the delayed decision, he added.
“It is natural,” he said. “Any investor would be concerned when there is no decision.”
The government had bolstered security around its existing installations including the Sapugaskanda refinery in recent weeks as tensions with the Liberation Tigers of Tamil Eelam (LTTE) mount after a string of attacks on troops in the Tamil-dominated north and east.
The Tigers had attacked oil installations until two decades of conflict was halted by a ceasefire in 2002, he said, including a raid on storage tanks in the capital Colombo. Many now fear a return to war if peace talks remain stalled.
Earlier this month Sri Lanka raised a 100-million-dollar loan from foreign banks to help pay hefty oil import bills, which threaten to blow a hole in the country’s balance of payments, the Central Bank said last Wednesday.
“The loan proceeds will also help to further stabilise domestic interest rates since these funds are raised from the international market,” the central bank said in a statement on the three-year syndicated loan arranged by Citigroup.
It comes after Sri Lanka got its maiden sovereign rating last month, a first step in tapping the international bond market for loans. Two international rating agencies — Fitch Ratings and Standard and Poor’s — assigned speculative ratings to the country.
Fitch gave the nation a BB- rating while Standard and Poor’s awarded an even lower B+ sovereign rating.
Despite the “junk bond” status, President Mahinda Rajapakse said the ratings marked a “respectable beginning (in) the universe of rated sovereigns.”
The island nation is anxious for cash to meet its rising oil import bill and tsunami-related reconstruction costs that have strained finances.
Both rating agencies said the country’s credit worthiness was affected by the absence of a permanent peace accord with the Tamil Tigers, who control much of the island’s north and east.
“We have taken all precautions,” he said. “For strategic reasons I cannot say more other than that security has been tightened.”
