Sri Lanka shuts only oil refinery amid severe dollar crisis

Sri Lanka on Monday temporarily shut down its only oil refinery for 50 days following the non availability of crude oil supplies due to the ongoing severe foreign exchange crisis in the country.

''The Sapugaskanda refinery will be closed for 50 days from today,'' energy minister Udaya Gammanpila told reporters here.

He, however, assured that the refinery’s closure would not cause a fuel shortage in the island nation.

Gammanpila said the decision to shut down the refinery was taken in the wake of the ongoing foreign exchange crisis in the local economy.

“Once we overcome the dollar crisis, the crude oil imports would resume and the refinery would restart operations,” he said.

The minister said instead of crude oil, the government will continue to import refined petroleum products to meet the fuel demand.

He said of the total crude oil being refined in Sapugaskanda, only 43 per cent are converted to refined fuel (petrol and diesel), the rest are furnace oil and aviation fuel.

Since there is no big demand for furnace oil and aviation fuel, it is better to import petrol and diesel which are in high demand, Gammanpila said.

The decision to import refined fuel instead of crude was due to the need to manage the available foreign reserves, he added.

“We are having discussions with several countries to obtain credit facilities to pay for oil purchases,” Gammanpila said.

The Sri Lankan government had earlier sought a USD 500 million credit line from India to pay for its crude oil purchases.

Gammanpila said the country has fuel stocks sufficient for 40 more days and there will be more shipments coming soon.

According to a report in news website Colombo Page, 90,000 metric tonnes of crude oil will arrive in December, however, that will be sufficient for only 15 days. Another shipment is expected again in mid-January. The report did not specify the origin of the shipment.

Ceylon Petroleum Corporation's (CPC) Jathika Sevaka Sangamaya wing (JSS) Secretary Ananda Palitha has cautioned that there will be a shortage of kerosene as 100 per cent kerosene requirement for the country is manufactured by the refinery, the report said.

This is for the first time that the 51-year-old Sapugaskanda refinery will be closed due to lack of crude oil, it said.

Lanka's oil bill has jumped 41.5 per cent to USD 2 billion in the first seven months of this year, compared to last year. The country is facing a severe foreign exchange crisis after the pandemic hit the nation's earnings from tourism and remittances, Finance Minister Basil Rajapaksa said in September.

The country's Gross Domestic Product has contracted by a record 3.6 per cent in 2020 and its foreign exchange reserves plunged by over a half in one year through July to just USD 2.8 billion. This has led to a 9 per cent depreciation of the Sri Lankan rupee against the US dollar over the past one year, making imports more expensive.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)