“We’re facing a challenging situation regarding fuel supply” - Energy Minister Udaya Gammanpila

Energy Minister Udaya Gammanpila takes questions from DailyMiror regarding Sri Lanka’s agreement with India to develop the Trincomalee Oil Tank Farm and the foreign exchange crisis affecting the fuel supply. 

Excerpts:

 Q  You have signed an agreement to develop the Trincomalee Oil Tank Farm jointly with India. India is a country which has geopolitical interests in Sri Lanka. Don’t you think that this agreement will leave room for India to involve in energy security of Sri Lanka?

We should shed light on this agreement based on the previous agreements with India in respect of the oil tank farm. There are three agreements signed by three different UNP Governments. Without understanding what our present obligations with India, we cannot understand what we have signed. On July 29, 1987, in parallel to the Indo-Lanka accord, then President J.R. Jayewardene signed an agreement with Indian Prime Minister Rajiv Gandhi by way of exchanging letters and setting out certain conditions they have orally agreed to. Agreements can be formed in writing, by implication or orally. They have written down their oral agreements. It says, “kindly confirm Excellency that the above correctly sets out the agreement reached between us- Rajiv Gandhi’.
Then President Jayewardene says, “This is to confirm that the above correctly sets out the understanding reached between us”. 

"In 2003, then Prime Minister Ranil Wickremesinghe, the nephew of Mr. Jayewardene, signed another agreement. Instead of developing these tanks jointly, this agreement renunciates the right of Sri Lanka to develop it jointly. It gives the exclusive right to India to develop these 99 tanks for a period of 35 years"

The third item of the agreement: the work of restoring and operating the Trincomalee Oil Tank farm will be undertaken as a joint venture between India and Sri Lanka. So, India has got Sri Lanka bound to develop this tank farm only with India as far as the 1987 agreement is concerned. In 2003, then Prime Minister Ranil Wickremesinghe, the nephew of Mr. Jayewardene, signed another agreement. Instead of developing these tanks jointly, this agreement renunciates the right of Sri Lanka to develop it jointly. It gives the exclusive right to India to develop these 99 tanks for a period of 35 years. That agreement expires only in 2038. We are in 2022. In 2017, then Minister Malik Samarawickrama, with Indian  Minister the late Susma Swaraj, signed an MoU. In it, Sri Lanka has agreed to lease all 99 tanks to LIOC for a period of 99 years.  Therefore, Indian geopolitical interest has been secured as shown by Indian presence in the tank not by us, but by three consecutive agreements signed by the UNP governments. India has no commercial interests in these tanks. India has national security interests. When I became the Minister of Energy on August12, 2020, there was a gazette notification published by the president dated August 9, 2020 mentioning in detail the duties and functions of the ministers. Under the energy minister there is a list of priorities. The fourth priority is to repair and use the oil tank farm.  When I tried to implement what I have been assigned to, I thought I could perform independently because the previous government had locked these tanks with India through three different agreements. I talked to India. Giving something away is easy. Taking them back is very difficult. I had a tough time with India. We had 22 rounds of talks. We were able to take control of 85 tanks out of 99. I have not given something which was in our control. I have taken back something which is ours, but was in the control of India. Fourteen tanks will be leased out to India in effect for 34 years more. Twenty four tanks will be given to the Ceylon Petroleum Corporation (CPC). The remaining tanks will be developed by the company called ‘Trinco Petroleum Terminal limited’. Of it 51 percent is owned by the CPC and the rest by the LIOC (Lanka Indian Oil Company). It is a state company. It is subjected to the public enterprise department circulars. Its accounts will be audited by the Auditor General. The COPE can summon the board of directors to Parliament and question them.  

This is a funny country. In a way, I am frustrated. I have, with the great difficulty taken 85 out of 99 tanks. Instead of praising me, they are attacking me. Is it patriotism? I wonder whether they are Indian agents. They are furious because I have taken 85 tanks out of Indian control. 

"When I tried to implement what I have been assigned to, I thought I could perform independently because the previous government had locked these tanks with India through three different agreements. I talked to India. Giving something away is easy. Taking them back is very difficult. I had a tough time with India"  

 

 

 Q  But, Indian involvement is now there because they will develop tanks jointly? 

Those days, all 99 tanks were under them. The Indian involvement has drastically been reduced.

 Q  My question is whether this will leave room for India to get involved in energy security aspects in Sri Lanka?

If there is any risk of Indian interference in our energy security, it has now come down drastically. It had full control over our tanks. Now, it has come down to 14 tanks. 

 Q  Now, the agreement has been assigned and the Cabinet approval is secured. What is the next step?

My next step is to make it public. If you log into the website of the Energy Ministry you can download this agreement. We got nothing to hide. Some people say this has been signed secretly. It is not.  Before going to the Cabinet I announced the content of the agreement to the general public. Before that I had consulted all our trade unions irrespective of their party affiliations. I briefed them thrice. I consulted the senior management of the CPC. I obtained prior Cabinet approval on January 3 before signing this agreement.  I tabled the signed agreement at the Cabinet on January 10. I have planned to table it in Parliament. 

"This is a funny country. In a way, I am frustrated. I have, with the great difficulty taken 85 out of 99 tanks. Instead of praising me, they are attacking me. Is it patriotism? I wonder whether they are Indian agents. They are furious because I have taken 85 tanks out of Indian control "

 Q  In Sri Lanka it is an extremely difficult task to manage relations with the trade union sector. You prevailed upon them and averted trade union actions this time around. How did you manage that?

It is too early to talk about it. I am a minister who meets all trade unions on a monthly basis irrespective of their political views.   When I don’t find JVPers at these meetings I inquire about them.  After the meeting I asked them why they missed it. I asked them to ensure their participation next time because I need their contribution. I have a very good relationship with them. I have sorted out their problems. They have publicly appreciated what I have done during the last one and half years. We may have different political parties, but live on the CPC. The CPC is their future. Whatever is done in the interest of the CPC, I am sure they will not go against it. 

 Q  In one of my previous questions I asked about the steps to be taken now to develop these tanks commercially. What are those plans?

Fourteen tanks given to India have been developed and are in use.   There is no question about the development of them. Twenty four tanks taken by the CPC will be developed immediately. We need Rs.200 million to develop each tank. We do have money. Our daily income is more than Rs. 1 billion. 
 We are the biggest corporate body in the country.  They will be used to store petroleum products to be distributed by the CPC. At the moment, the entire country receives petroleum products from Colombo incurring a huge transportation cost. We have to distribute petroleum products to the Northern Province, Eastern Province, North-Central Province, Kurunegala District and Badulla District from Trincomalee hereafter. By doing this exercise, we are going to save at least Rs. 1 billion per annum. 

"The Trinco Petroleum terminal Ltd is a joint venture. It will take some time. Our plan is to prepare a feasibility report within six months and a business plan within one and half years. Therefore we can repair and develop the tank farm. As you know this tank farm is 100 years old "

 Q  Do you have a time-bound action plan for it?

This is to be done immediately. Within a year, that task will be completed. The Trinco Petroleum terminal Ltd is a joint venture.  It will take some time. Our plan is to prepare a feasibility report within six months and a business plan within one and half years.  Therefore we can repair and develop the tank farm. As you know this tank farm is 100 years old. We need a very good repair. They have never been used except during the World War II. We have much potential. First, we can rent these tanks to the government to maintain energy security reserves. Secondly, we can rent these tanks to oil investors. Like the share market oil prices fluctuate. Due to these fluctuations there are investors who purchase oil at lower prices and sell at higher prices.
Trincomalee is a sunny district. We can have a solar power plant there. 
We can do ecotourism there. We can use these tanks to store edible oil – coconut oil, palm oil etc- bio gas. Even future energy sources such as nitrogen can be stored. Therefore potential is there. We have to wait patiently for this company to do the feasibility study. 

 Q  Earlier, you said India has geopolitical interests more than commercial interests in this regard. Will India be genuinely interested in developing them commercially then?

If they can destroy the tank farm that is to be the ideal solution.  That is what I believe in. They may have different views. This tank farm can store eight million barrels of petroleum. If these tanks are in the possession of an enemy of India it can attack India without a break because of the uninterrupted fuel supply for their planes, ships and submarines. So, this is a national security threat to India. If this is not in existence, there is no threat. If they had a commercial interest, they could have developed these tanks during the past nine years. But, they did not.  I don’t think they have a commercial interest, but we do. That is why they keep only 14 tanks. The rest of the tank farm was taken by us. Their development is not with India, but with us. We must utilise this huge asset gifted by the British. Unfortunately, we have never been using these tanks for the past100 years except during World War II. 

 Q  What are the plans for engaging India and convincing them to develop? 

Unless they invest and purchase shares, what will happen? If there is a sum of one billion rupees to be invested, CPC will invest Rs.510 million to maintain its 51 percent equity, and the LIOC Rs. 490 million percent to maintain their 49 percent. If they do not invest, what will happen? The CPC share will increase to 99 percent.  
It is simple like that. If they don’t invest, they will lose their shareholding in the company. 

"Trincomalee is a sunny district. We can have a solar power plant there. We can do ecotourism there. We can use these tanks to store edible oil – coconut oil, palm oil etc- bio gas. Even future energy sources such as nitrogen can be stored. Therefore potential is there. We have to wait patiently for this company to do the feasibility study"

 Q  Do we have enough financial strength to develop it on our own?

Our total commitment is to develop 24 tanks taken over by the CPC. Our investment in the Trinco Petroleum Terminal Ltd will be Rs. 11 billion. 

 Q  Fuel supply is uncertain as some people say. What can you say about the fuel supply?

As you know the opposition members- Opposition Leader Sajith Premadasa, former Prime Minister Ranil Wickremesinghe, MPs Mujibur Rahman, Champika Ranawaka- were forecasting an imminent fuel shortage. They have been doing it since June, 2021.  I, with the support of my team, was able to ensure that there will be uninterrupted fuel supply. Despite their warnings and predictions, you yourself witnessed that there was no fuel shortage. 
Petroleum is our biggest import commodity. Around one-third of our export proceeds is spent on importation of petroleum products.  Despite that fact we were able to ensure an uninterrupted fuel supply. There were shortages of flour, milk powder, LPG, cement, but not fuel. We do not manufacture petroleum products in the country. 
We don’t have enough foreign currency to purchase them.  Thirdly, we don’t have enough storage facilities. A letter of credit is in the range of US $ 25– 60 million. Nobody is willing to take the risk to send cargo to a vulnerable country like Sri Lanka. We are facing a challenging situation at this moment. But we have friends. So far we have ensured an uninterrupted fuel supply. I am hoping for the best. 

"This tank farm can store eight million barrels of petroleum. If these tanks are in the possession of an enemy of India it can attack India without a break because of the uninterrupted fuel supply for their planes, ships and submarines. So, this is a national security threat to India. If this is not in existence, there is no threat"

 

 

 Q  Earlier you said things would be stable after January. Can you elaborate more on that?

That is only for the fuel. We are working on several credit lines.  Those are under negotiation. Talking in detail at this point of negotiation will jeopardize it. 

 Q  Previously you had talks with some of the countries in the Middle East. Did they work?

No. One reason is adverse publicity. Therefore I have decided not to talk about them until matters are finalized. 

 Q  What was the adverse publicity?

There is no point in talking about them.  We should learn lessons from these experiences. We should learn the way of doing things without bitter experience. 

 Q  What was the arrangement to supply fuel to the Ceylon Electricity Board (CEB)?

I agreed to supply them furnace oil-1000 tonnes per day without charging them in dollars. We have a limited stock of furnace oil.  Therefore for whatever we import they have to find dollars. I have a great burden on my shoulders to find around US $ 350-400 million per month to ensure that our people have adequate petrol and diesel in the market. As the Energy Minister I must take this burden. But I cannot take the burden of another ministry as well. Let them find the dollars! I will import the product.  

"7.Twenty four tanks taken by the CPC will be developed immediately. We need Rs.200 million to develop each tank. We do have money. Our daily income is more than Rs. 1 billion. We are the biggest corporate body in the country. They will be used to store petroleum products to be distributed by the CPC"

 Q  You were critical of the LNG deal with New Fortress Energy of the United State. You took a different stand on the deal with India. Why is it?

I have no grudge against the US, India, China or any other country.  I love my country. I am for anything in favour of my country.  I am against anything against the interests of my country. Our Government tried to go for a joint venture with Adani Group for the development of the East Container Terminal of the Colombo Port. We vehemently opposed it and ensured that it would not happen. It was India. It was against the mandate of the president.  The president, in the manifesto, said it would be developed by the Government and only the west terminal as a joint venture with the private sector. Here, 99 tanks have been with India. They were subjected to decay. Taking them back from India is in the best interest of Sri Lanka. 
The New Fortress energy deal is very much against the interest of Sri Lanka. 

“Indian influence in oil tank farm has drastically reduced”

We should shed light on the agreement on oil tanks based on the previous agreements with India in respect of the oil tank farm. There are three agreements signed by three different UNP Governments. Without understanding what our present obligations with India, we cannot understand what we have signed. On July 29, 1987, in parallel to the Indo-Lanka accord, then President J.R. Jayewardene signed an agreement with Indian Prime Minister Rajiv Gandhi by way of exchanging letters and setting out certain conditions they have orally agreed to. Agreements can be formed in writing, by implication or orally. They have written down their oral agreements. It says, “kindly confirm Excellency that the above correctly sets out the agreement reached between us- Rajiv Gandhi’.
Then President Jayewardene says, “This is to confirm that the above correctly sets out the understanding reached between us”. 

The third item of the agreement: the work of restoring and operating the Trincomalee Oil Tank farm will be undertaken as a joint venture between India and Sri Lanka. So, India has got Sri Lanka bound to develop this tank farm only with India as far as the 1987 agreement is concerned. In 2003, then Prime Minister Ranil Wickremesinghe, the nephew of Mr. Jayewardene, signed another agreement. Instead of developing these tanks jointly, this agreement renunciates the right of Sri Lanka to develop it jointly. It gives the exclusive right to India to develop these 99 tanks for a period of 35 years. That agreement expires only in 2038. We are in 2022. In 2017, then Minister Malik Samarawickrama, with Indian  Minister the late Susma Swaraj, signed an MoU. In it, Sri Lanka has agreed to lease all 99 tanks to LIOC for a period of 99 years.  Therefore, Indian geopolitical interest has been secured as shown by Indian presence in the tank not by us, but by three consecutive agreements signed by the UNP governments. India has no commercial interests in these tanks. India has national security interests. When I became the Minister of Energy on August12, 2020, there was a gazette notification published by the president dated August 9, 2020 mentioning in detail the duties and functions of the ministers. Under the energy minister there is a list of priorities. The fourth priority is to repair and use the oil tank farm.  When I tried to implement what I have been assigned to, I thought I could perform independently because the previous government had locked these tanks with India through three different agreements. I talked to India. Giving something away is easy. Taking them back is very difficult. I had a tough time with India. We had 22 rounds of talks. We were able to take control of 85 tanks out of 99. I have not given something which was in our control. I have taken back something which is ours, but was in the control of India. Fourteen tanks will be leased out to India in effect for 34 years more. Twenty four tanks will be given to the Ceylon Petroleum Corporation (CPC). The remaining tanks will be developed by the company called ‘Trinco Petroleum Terminal limited’. Of it 51 percent is owned by the CPC and the rest by the LIOC (Lanka Indian Oil Company). It is a state company. It is subjected to the public enterprise department circulars. Its accounts will be audited by the Auditor General. The COPE can summon the board of directors to Parliament and question them.  

This is a funny country. In a way, I am frustrated. I have, with the great difficulty taken 85 out of 99 tanks. Instead of praising me, they are attacking me. Is it patriotism? I wonder whether they are Indian agents. They are furious because I have taken 85 tanks out of Indian control. 
Those days, all 99 tanks were under them. The Indian involvement has drastically been reduced.
If there is any risk of Indian interference in our energy security, it has now come down drastically. It had full control over our tanks. Now, it has come down to 14 tanks.