Minister of Petroleum Resources Development Chandima Weerakkody says, Prime Minister Ranil Wickremesinghe has given an undertaking to the petroleum sector trade unions that his discussions in India will be limited to a political understanding and in the event of the parties entering into a legally binding agreement, discussions with trade unions and other stakeholders will be held prior to entering into such agreement.
Petroleum Trade Union Collective Media Spokesman Bandula Saman Kumara said, they are not against providing a solution to the issue of the oil tank farm in Trincomalee. We call upon the Government to vest these tanks in the CPC so that it can be developed for distribution of petroleum products and also provide facilities to other countries to store their oil and thereby earn a rent.
Q: What is the true situation regarding the oil tank farm in Trincomalee?
A: This oil tank farm was built by the British in the 1940s. When we gained independence in 1948, the British retained the oil tank farm with them. In 1956, late Prime Minister S.W.R.D. Bandaranaike had to take over this land and the tanks from the British for 2,56,000 sterling pounds. Since then the CPC has been using a few of the oil tanks to cater to the requirement in the area. In 2003, the Ranil Wickremesinghe Government entered into a lease agreement of 35 years with the Indian IOC and the Government of India undertook to pay US$ 100,000 per year.
After the collapse of the UNP Government in 2004, the successive governments- Chandrika Bandaranaike , Mahinda Rajapaksa and the incumbent Government continued to accept the lease agreement. No efforts were made by any of the governments to reverse the agreement. Neither had there been any initiative to develop the said oil tank farm. After I was appointed as the Minister, I did a study and found, if we can do the distribution from Hambantota, Trincomalee and Kankasanthurai, we can save a lot and protect the environment by resolving the traffic issue in the country. Based on those findings, I submitted a Cabinet paper to acquire 15 of the tanks. My proposal was to give 15 tanks to IOC, 15 for the CPC and develop the balance as a joint venture of which shares will be equally held. That was approved.
Then again, the power crisis came up and a Cabinet Sub Committee was appointed, jointly chaired by Minister Ranjith Siyambalapitiya and myself. As advised by the experts in the energy sector, the issue of a buffer stock was raised. These tanks could be used to accommodate the buffer stock and thereby around Rs.400 million can be saved for the CPC. Therefore, a joint Cabinet paper was presented to the Cabinet on the same line, 15-15 and the balance to be shared.
The Cabinet accepted it. Again the Prime Minister submitted a Cabinet paper to lease out the tanks to the IOC. When the matter was discussed by the Cabinet, the Premier agreed to take it up with the Indian Foreign Secretary.
So the Premier and myself met the Indian Foreign Secretary. The Foreign Secretary met the President who informed him that we should have at least 10 oil tanks and 14 used by the IOC can be leased out to them and the balance 74 can be a joint venture.
While these negotiations were ongoing, the trade union issue came up. Discussions were held with the Prime Minister, who gave an undertaking to the unions that his discussions in India would be limited to a political understanding and in the event of parties entering into a legally binding agreement, there will be discussions with the trade unions and other stakeholders prior to such agreement.
That is the present position. I must say, the CPC handles over 85 percent of the total oil distribution. Of that, distribution in this region is about 7 percent. So if we get 10 tanks, it would be sufficient to operate to save that amount of money. What we are trying to do now is to get at least part of what has been given to a another country. Over a period of 15 years four successive Governments have accepted payment.
Technically, there are issues and the people talk about loopholes in the agreement. Even I have noticed a few such flaws. But, the fact is, these are international agreements diplomatically entered into between two countries that have been friends for a long time.
Q: How did this problem arise when these tanks belonged to Lanka IOC?
A: Technically, it is so. What we are trying to do now is to acquire at least part of the benefits to our Government.
Q: What is the scope of the proposed agreement with India? Will such an agreement be signed during the Prime Minister’s visit to India this week?
A: No. It will be limited to a political understanding between the two countries.
Q: Has the Government considered the three main demands of the petroleum sector trade unions positively?
A: As I said earlier, the Prime Minister gave an undertaking to the trade unions that only a political understanding will be reached, and in the event of the parties entering into a legally binding agreement, discussions will be held with the trade unions and other stakeholders prior to any agreement.
Q: What are the advantages of developing the oil tank farm in Trincomalee? Does it come under the Indian assistance plan to develop Trincomalee as a regional petroleum hub?
A: That has not been discussed yet.
Q: Are you happy with the response to the fuel crisis and what are the steps taken to avoid a repetition of such inconvenience to the public?
A: I can’t say I am happy about such things. But we have asked the trade unions to trust us. Hopefully, there will be no such repetitions. I believe our trade unions will conduct themselves in a responsible manner. They can understand the problems the people and the country had to undergo due to their wildcat strike.
Q: Have you assessed the loss caused to the CPC by the strike action of the trade unions and the loss caused to the general economy by man hours wasted on fuel queues?
A: We have not been able to assess the loss on man hours wasted. Actually, there is no loss incurred by the CPC because petrol is a fast moving product.
Q: Are there any plans to privatise the CPC which has been identified as a loss making institution?
A: Not at all. Of course not under any circumstance.
Q: If the CPC is not privatised what are the plans to reform it and turn it into a profitable institution?
A: The CPC is a profitable institution. Our profit for this year is close to Rs. 80 billion.
So we are trying to introduce automation into the system.
Q: What is the current situation with regard to oil exploration? There are allegations that most of the blocks have been given to India?
A: We are ready to call for bids for M 2 block on September 30. The process is almost finalized. Previously, four blocks had been given to India during 2010 or 2011 and the LNG was discovered in two of the blocks.
Q: What are the plans with regard to the Sapugaskanda oil refinery? Has the demand for fuel gone up due to the rapid increase in the number of vehicles and the increasing use of thermal power plants?
A: Annually, there is a 2.5 percent increase of the demand for fuel. With regard to refurbishment and development of refinery , I appointed a committee comprising experts in petroleum industry as well as financial experts and they submitted a proposal. It was again studied by another expert committee appointed by the Prime Minister.
All nominees in this committee unanimously approved my proposal. Then, as one Cabinet Minister was of the opinion that he had two concerns, another committee was appointed. The second committee has rejected my proposal.
Therefore, it will be submitted to the Economic Affairs Committee, soon. I hope they will be in a position to implement the proposal compiled by the expert committee.
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UNP Government and IOC agreement harmful to the country - unions
Media Spokesman of the Petroleum Trade Union Collective and President of the Sri Lanka Independent Employees’ Union, Bandula Saman Kumara told the Sunday Observer that they are not against providing a solution to the issue of the oil tank farm in Trincomalee. We call upon the Government to vest these tanks in the CPC so that it can be developed for distribution of petroleum products and also provide facilities to other countries to store their oil and thereby earn a rent. All these can be done by the CPC, there is no need to give these tanks to any other party for a mere pittance.
We had discussions with the Prime Minister regarding the crisis in the petroleum sector. We emphasized on three major issues. We believe, we were able to resort to the most successful trade union action in the recent past. It is a matter to be happy as most people realized that we resorted to trade union action as a national duty. Since this National Government assumed office, they continuously adopt a policy to sell national resources.
In order to mislead the people, they allege that they have to sell national resources to pay back the debts passed down by the Mahinda Rajapaksa government. If the Government plans to sell national resources for its survival , there is no point in having a Government. If the Government carries on with money obtained by selling national resources, it cannot be called good management. The biggest victory we achieved was that we made the country aware of a massive crisis in the petroleum sector.
The CPC is the pivot of the national economy. Therefore, steps should be taken to further strengthen it. We temporarily suspended trade union action as the Prime Minister gave us an undertaking. On the eve of his trip to India, the Premier spent over one hour to discuss the issue with us. We could reach a compromise because the Premier gave a written assurance that the proposed agreement will not be signed during his state visit to India.
He categorically said if any agreement was to be signed, prior to that it would be discussed with trade unions. Our strike has caused an awakening among the people. We have proved that as workers, we can rally round and launch a struggle against wrong policies pursued by the Government. We would form a massive front to protest against the selling of national resources and issues such as SAITM, ETCA and curtailing pension rights.
The agreement signed between then UNP Government and IOC in 2003 is harmful to the country. As a result, the CPC was reduced to pieces which was earlier a massive boost to the economy. One oil tank was leased for US$ 1,000 per year. So 99 oil tanks have been leased for US$ 99,000 per year.
If these oil tanks were under the CPC , we would have earned much profit in renting them out. There was no need whatsoever to lease these oil tanks to the IOC. Before 2003, 267 CPC employees worked at the China Bay petroleum storage tank complex and fuel was distributed to the entire Eastern Province from it. Those days, the entire oil tank farm area had been cleared by the CPC employees and were well protected by the CPC.
After some oil tanks were given over to the LIOC, they only used the nearest tanks, leaving the rest to wilderness. No security was deployed as they had to pay salaries.
Valuable parts of some of the tanks had been stolen by thieves, who were later arrested by Police and the stolen property handed over to the LIOC. The LIOC had bundled them off to India.
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2003 lease agreement revisited for implementation
The then Indian Prime Minister Rajiv Gandhi and Sri Lankan President J. R. Jayewardene having met in Colombo on 29 July 1987 singed the Indo-Sri Lanka Agreement. At the exchange of letters between the two Leaders, Indian Prime Minister Rajivu Gandhi in his letter to the President has made reference that “ the work of restoring and operating the Trincomalee oil tank farm will be undertaken as a joint venture between India and Sri Lanka.”
The UNP led Government signed a tripartite agreement in 2003 to develop the Trincomalee oil tank farm with India. The Government of Sri Lanka, Lanka IOC Pvt. Ltd. (LIOC) and Ceylon Petroleum Corporation (CPC) signed this agreement regarding the oil tank farm, in February 2003.
As per the lease agreement, the oil tank farm with 99 tanks was to be handed over to the LIOC to be used for a period of 35 years. Accordingly, they started using 14 tanks in the lower farm area. The remaining 84 tanks in the upper tank area remain disused. In 2004, the UNP Government was unseated at a snap General Election and the SLFP led UPFA that succeeded, was not keen on the implementation of the provisions of the agreement. Since then, the agreement remained only in letter, for most parts.
After 14 years, the UNP is back in power as the core of a ruling coalition, the National Unity Government. It is apparent that the 2003 lease agreement is now revisited for implementation. In fact, Indian Prime Minister Narendra Modi who undertook an official visit to Sri Lanka soon after the formation of the new Government in 2015 referred to the proposal to develop Trincomalee as a petroleum hub in the region.
The China Bay tank farm of 850 acres of land has 99 tanks- each with a capacity to hold 12,100 metric tons of oil. The oil storage complex that connects the Trincomalee harbour is of historic and strategic significance and is the largest tank farm located between the Middle East and Singapore.