Financial Times

Indians dominate SL fuel market?
By Akhry Ameer
Indian companies could dominate Sri Lanka's domestic petroleum market soon as efforts get underway to find a third market player after the Ceylon Petroleum Corporation (Ceypetco) and the Indian Oil Corporation (IOC).

According to reports reaching Colombo, the Indian state-run Oil and Natural Gas Corporation (ONGC) plans to follow the footsteps of IOC in bidding for the third slot in the local petroleum market. Two other Indian corporations, Hindustan Petroleum Corp Ltd and Bharat Petroleum Corp Ltd, all of which have excess capacity and coastal refineries in the South of India, are also said to be interested in Sri Lanka.

So far only Caltex Lubricants Lanka Ltd (Caltex), the local subsidiary of the multinational conglomerate, has expressed interest but it is also worried about some issues relating to access for the third player.

The Public Enterprise and Reform Commission (PERC) last week finally called for expressions of interest from international petroleum companies to take over 100 Ceypetco fuel stations out of 200. Already 100 other stations are run by IOC while Ceypetco will retain the balance 100.

Oil major Caltex, which earlier openly expressed interest in entering a liberalized market, said it is worried about mixed signals received in the market place. "We have a lot of concerns about the latest developments. The EOI (Expressions of Interest) have been called for and we are evaluating the opportunity in dialogue with our regional office in Singapore. The information given is inadequate, as we do not know the value of assets, the framework, etc. We are also gathering information from our stakeholders," said Kishu Gomes, Managing Director, Caltex Lanka.
Shell Gas Lanka corporate communications manager, Steven Bartholomeusz, said the company was interested in being the third player.

But, he added, given their mixed experience in the LPG industry they would like to see better commitment from the authorities in terms of stable rules and regulations. "There is a need for transparency and a level playing field."

One of the issues is that while Caltex has a monopoly in the lubricants market through fuel stations, the IOC is exercising its authority in holding separate discussions with private dealers. Of the total 1,100 odd petrol stations in Sri Lanka 350 are run by private dealers.

IOC is reportedly negotiating to buy some of these private stations. IOC officials were not immediately available for comment. Caltex said that 100 of the most profitable stations at strategic locations of the 750 stations run by Ceypetco have been given to the IOC. As such, a third player has to choose stations from the balance. Therefore, allowing the company a free run of the private dealers before the entry of the third player clearly creates an unfair opportunity.

Gomes added that his company made several representations to the authorities on this issue but to no avail. He was of the view that if the market conditions are properly laid out there is potential for the local market to develop.

Of the Indian companies looking at Sri Lanka, ONGC has already secured licenses to set up 1,100 petrol stations in India. ONGC's interest in Sri Lanka lies in the fact that like many other Indian refineries it has surplus capacity to export after supplying at home. "It makes a lot of business sense. We are setting up petrol stations afresh in India and here (in Sri Lanka) is an opportunity to acquire ready infrastructure," a company official was quoted as saying in Indian news reports.

Other oil majors present in Sri Lanka were not available for comment as to whether they would make a pitch for the third slot in the petroleum market. The third entrant together with Ceypetco and IOC will also acquire one third of the ownership in associated storage, transportation and related infrastructure that has so far been operated solely by Ceypetco. Earlier this month Ceypetco unfolded its new livery to reflect the new tri-partnership operation that would form the new face of the local domestic petroleum market.

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