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July 19, 2016

Volume 7 Issue 8

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Sri Lanka Liberalizes Market

Sri Lankan officials decided last week to grant more licenses for lube suppliers, according to an executive from its state-owned oil company. The move was contentious because some existing license holders warned it could lead to a glut in the market.

After flip-flopping on the issue several times in past years, Sri Lanka again firmed its decision to allow more suppliers to participate in the market, which is currently restricted to 13 license holders.

“In a Ministry of Petroleum Resources Development meeting in the last week, a decision was taken to grant more licenses, and some more players might be there in the near future,” Ceylon Petroleum Corp. Chairman and Managing Director T.G. Jayasinghe told Lube Report Asia.

The island nation’s move to further liberalize its finished lubricants market had most recently been proposed in late 2015 during a budget speech by finance minister Ravi Karunanayake, who claimed that more competition will encourage companies to invest in more value-added products and decrease prices for consumers.

Karunanayake also proposed the government stop prohibiting lubricant users and distributors from importing them unless existing domestic suppliers state they don’t carry such products. The restrictions have since been lifted, according to Jayasinghe. “As of now, lubricants trade has been liberalized, and lubricants can be imported by taking licenses from the [Import and Export Control Department] and paying the necessary taxes.”

Sri Lanka also restricts lubricants manufacturing to a total of three companies after having granted CPC a license in May. Some observers predict finished lubricant prices will decrease once CPC begins streaming its 42,000 metric tons per year plant, which is being built in the Muthurajawela region north of Colombo.

“Certainly [lubricant] prices can be reduced by 25 percent as there is no tax on local products,” Jayasinghe added, noting that the foundation-laying ceremony for the U.S. $30 million plant – set to be owned and operated in part by Malaysian blender Hyrax Oil – will be held this week. The plant will likely stream early next year.

Some players opposed the government’s decision to open lubricants trade for new players. Lanka IOC Senior Vice President B.B. Patra said the approximately 44,000 t/y market is already saturated with the 13 existing players.