SL to cut oil imports amidst dwindling forex reserves
Sri Lanka will be curtailing crude and refined oil imports this year in an effort to shield the dwindling of foreign reserves, Finance Ministry sources said.
The fuel purchases in low volumes will be made from producing countries in the Gulf region on favourable terms with one year credit facility instead of the current credit limit of 180-270 days, a senior Treasury official revealed.
Sri Lanka imported around 13.5 million barrels of crude oil (20 per cent of the total import bill) worth around US$3.9 billion and the decline in global oil prices coupled with slump in domestic consumption helped to save around $1.3 billion in 2020.
As per the procurement plan of the Ceylon Petroleum Corporation (CPC) for 2021, cost of imports of crude oil and refined products is projected to be $2.5 billion roughly benchmarking at $59 a barrel of crude oil.
Last year the country was been able to manage the low petroleum product demand due to fixed retail price of fuel despite the massive drop in world prices during the COVID-19 pandemic, he said. During the 2020 lockdown period, the daily demand of petrol and diesel dropped by 80-90 per cent and the CPC’s daily supply dropped to 150 metric tonnes of petrol from 2,300 metric tonnes while the diesel supply came down to 500 metric tonnes from 4,300 metric tonnes in the second quarter.
Fuel prices have been kept at a reasonably high level inspite of falling world crude oil prices and this has helped the CPC to save millions of dollars in 2020.
The Government has spent Rs.1.74 billion for refined fuel imports in 2020, a reduction of 35 per cent compared to the fuel import bill of $2.7 billion in 2019.
However the country has no option other than lowering of oil import volumes this year in the face of the sharp rise in the petroleum market which will result in fuel import bill soaring to $3-5 billion this year, he said adding that it will erode foreign reserves. Under these circumstances, the CPC will be lowering the oil import volumes in accordance with its procurement plan 2021 even though restraining the rising import bill is an uphill task, he pointed out.
Fuel imports will fall on lower demand by 17 per cent to 14,800 b/d in 2021 while the Dubai-based Enoc and Swiss Singapore will supply 12,200 b/d of 10ppm and 500ppm gasoil this year.
Trading companies E3 and BB Energy will supply around 10,500 b/d of gasoline, the CPC procurement plan revealed adding that the balance requirements will be purchased through term and spot tenders.