Financial Times

Bunkers:Dispute over port lease of storage tanks for edible oils
The planned lease of four storage tanks inside Colombo port to store edible oils has been criticised by sections of the shipping industry who believe it could be better used for bunker fuels.

But the Sri Lanka Ports Authority has said it cannot allow bunker fuels to be stored inside the port because of security restrictions. Tenders for the lease of the four storage tanks with a combined capacity of 10,000 MT for the storage of edible oil closed on August 23 with the highest bid coming from N.M.K. Warehouse and Logistics (Pvt) Ltd.

It made a bid of US$351,000 per year, amounting to $1,757,000 for five years. Hayleys transportation subsidiary, Hayleys Advantis, made a bid of $90,000 per year, amounting to $450,000 for five years.

Shipping industry officials said the tanks were once leased to East-West for storage of bunker fuels but that this agreement was never implemented because of security concerns. SLPA chairman Dileepa Wijesundera said the storage tanks are situated inside Colombo Port which is within a high security zone.

“The security for the port has been brought under the Sri Lanka Navy. With the implementation of the ISPS (International Ship and Port Facility Security) Code requirements, stringent security measures are being followed by the Sri Lankan sea ports,” he said.

“In the circumstances, SLPA is not in a position to permit storage of bunker fuel in the tanks situated inside the port premises.” Shipping line officials said more storage tanks for bunker fuels needed to be developed to enable bunker suppliers to reduce prices even further and also ensure better availability.

The existing onshore storage tanks with 30,000 MT capacity at Sapugaskanda connected to the port by pipelines are controlled by Lanka Marine Services (LMS), a subsidiary of John Keells Holdings.

LMS had long held a virtually monopoly on bunkers inside the Colombo port but a recent court ruling ended restrictions on other players entering the bunker market.

These suppliers now floating storage but shipping officials said this was expensive and also that bunker supplies based on floating storage may not be available during monsoon conditions.

“Bunker supplies from barges and tankers at Colombo port may be viable in the short term but certainly not in the medium to long term considering the high charter higher rates,” said a shipping line official.

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