SL looks to triple refinery capacity

Colombo: Sri Lanka's state-run Ceylon Petroleum Corporation (CPC) refinery expansion may be doubled to a 100,000 barrels-per-day project and its cost may go up to a billion dollars, a top official said.

'An Iranian team has already started a feasibility project and now we are looking at a bigger project, which may cost 800 to 1,000 million dollars,' CPC chairman Ashantha de Mel said.

'The feasibility will be completed by May.'

CPC now has a 50,000 bpd refinery and also imports refined products from abroad but doubling its capacity will allow the utility to stop imports. A 50,000 bpd expansion with was expected to cost around 500 to 700 million dollars.

Boosting total capacity to 150,000 bpd will allow CPC to export refined products.

'We can even sell to LIOC,' he said.

CPC has a more than two thirds of the market and is the only retailer of kerosene, while LIOC, a unit of the Indian Oil Corporation has the balance.

CPC's existing refinery, built in 1968 with Soviet help, is not very efficient as it yields a large volume of furnace oil.

De Mel wants to install a hydro cracker which will allow CPC to produce less furnace oil and more diesel and petrol which are more valuable.

Attempts to raise commercial loans for the project failed after government politicians shot down a plan to market price petroleum products and stabilize the finances of CPC, which would have given confidence to lenders.

The CPC is under pressure from politicians to subsidise fuel, which they believe will keep inflation low.

The refinery project is now being financed by Iran, but the exact terms of the loan have not yet been decided, he said.

The loan was promised following a state visit by President Mahinda Rajapakse to Iran. Iran is also giving seven month of credit for CPC to import crude oil.

Iran itself has a shortage of refinery capacity as it heavily subsidises petrol and has to spend billions of dollars each year to import refined products.

Late last year Iran started rationing petrol.

In November 2007 inflation in Iran was 19.1 percent compared to 19.3 percent in Sri Lanka.