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Proposal for Operation and Bunkering Facility at Port of Hambantota

Colombo Port's New Warehouse To Be Opened

Sunday, September 22, 2019
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 Hambantota awaits bunkering business
 

New port coming up at Hambantota
 

The shipping community in Sri Lanka awaits the upgrading of the Marine Fuel (bunker) business in Sri Lanka, presently operated from the Colombo Port from the present level of around 27,500 to 35,000 metric tonnes per month volume to a key regional maritime hub offering competitive prices internationally, at the new port at Hambantota.

Top shipping sources told Daily News that while Colombo based bunker suppliers in the recent past have been offering competitive prices during the past few weeks for fuel oil tanks to a bunching of fuel oil arrivals resulting in cut price selling to create tank space to accommodate the new imports, the shipping trade is of the opinion that the Sri Lanka Ports Authority and Customs would need to focus on many factors to develop Hambantota.

At present, Sri Lanka imports all its petroleum requirements including for bunkers a total of around 4.8 million metric tonnes per year.

The National Oil Company, Ceylon Petroleum Corporation refines around 2.12 million metric tons per year at the sole 52,500 barrels per day refinery at Sapugaskande.

The balance requirement of around 2.7 million metric tonnes refined product is imported by Ceypetco, Lanka IOC (LIOC) and the active licensed bunkers traders on the spot market.

These purchases on the spot market are generally from suppliers based in Singapore and the pricing formula is linked to the international petroleum index PLATTS where a premium is added on the Singapore base price, on top of the premium is the freight component.

In order that Hambantota based supplies be effected at a price that is competitive internationally, the new port at Hambantota, needs to focus on refining its supply chain as almost all of the suppliers of refined petroleum products including fuel oil and gas oil the main products required by the marine industry at present are from Singapore, UAE and India who offer their exportable surplus at a price linked to the PLATTS index where freight has to be added on top of the cost of the cargo and the premium to purchase.

This is the basis of international oil trading other shortcomings such as limited tank space, common pipelines, low pumping speeds, antiquated Customs process relative to the “bonding” (duty free status) of marine fuel and overall increasing the countries refining capacity in tandem with Ceypetco and a competitive environment with a level playing field for all licensed bunker suppliers. Any savings are by virtue of economies of scale however, the import cargo parcel size would have to be increased considerably (say 100,000 metric tonnes plus per shipment) to achieve savings that would provide an internationally competitive price either at Hambantota or Colombo.
(DN-16062011)

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