China’s Sinopec seals deal to enter Sri Lanka’s retail fuel market

Power and Energy Ministry Secretary M.P.D.U.K. Mapa Pathirana and Sinopec Fuel Production and Marketing Department Managing Director Chen Chengmin signed the agreement in the presence of President Ranil Wickremesinghe 

• A key condition for those entering market afresh would be to source their own forex to procure fuel supplies, without relying on local banks

China Petroleum & Chemical Corporation (Sinopec) inked the long-term contract agreement with the Sri Lankan government yesterday to enter Sri Lanka’s domestic fuel market, bringing more stability and reliability to the country’s fuel supply, the President’s Media Division (PMD) announced.
The signing ceremony took place at the Presidential Secretariat yesterday morning, with representatives from both Sri Lanka and Sinopec
in attendance. 
Power and Energy Ministry Secretary M.P.D.U.K. Mapa Pathirana and Sinopec Fuel Production and Marketing Department Managing Director Chen Chengmin signed the agreement in front of President
Ranil Wickremesinghe.
The licence grants Sinopec to import, store and distribute fuel in Sri Lanka for a 20-year period while bringing in competition to the country’s duopoly retail fuel market dominated by state-owned Ceylon Petroleum Corporation (CPC) and Lanka Indian Oil Company (LIOC). 

In addition, Power and Energy Minister Kanchana Wijesekera said Sinopec would also be granted a 20-year licence to operate 150 fuel stations currently operated by CPC. Further, Sinopec is set to invest in 50 new fuel stations along with other investments into the country’s energy sector.
According to the PMD, Sinopec, along with its affiliated companies, is required to commence operations in Sri Lanka within 45 days, following the issuance of the licence.
Both CPC and LIOC, which rely on the domestic banking sector, faced significant challenges in securing sufficient foreign exchange for fuel shipments, resulting in a severe fuel shortage last year.
In response to this, the Power and Energy Ministry calls for tenders from reputable petroleum companies established in oil producing countries. Accordingly, the government in April announced that China’s Sinopec, United Petroleum of Australia and RM Parks of the United States, under a collaboration with Shell PLC, had been selected to enter the country’s retail fuel market.
The PMD highlighted that a key requirement for new retail suppliers entering the market is their ability to secure forex requirements, without depending on the domestic banking sector. “It was mandated that these companies source their own funds for fuel procurement through foreign sources, at least during the initial one-year period of operation,” it said.
The government expects this initiative to translate into a more stable and reliable fuel supply, boosting the country’s energy sector and providing assurance to consumers.