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India, Sri Lanka to Sign Oil Tank Agreement

In a move that might energize India – Sri Lanka relations, the two neighbouring nations are going to sign a mega oil tank agreement. Sri Lanka as per latest media report has confirmed that the deal will be signed with India.

The deal is likely to be inked in a month’s time. As per the proposed deal, India will jointly develop the Trincomalee oil tank farms. Both sides have been discussing this project for months. 

According to a statement by the Sri Lankan Energy Minister Udaya Gammanpila, both sides have been discussing the deal for about 16 months and now they are very close to locking the deal in Trincomalee.

As part of preparation for the deal the minister has instructed the Ceylon Petroleum Corporation (CPC) to form a subsidiary company for work on this project. The subsidiary company would be named Trinco Petroleum Terminal Ltd.

The special purpose vehicle has got the approval of the President Gotabaya Rajapaksha. Next the proposal would have to be cleared by the cabinet, which will meet after the holiday season.

Background of Trincomalee Oil Tanks Project

Trincomalee Oil tanks were built during the Second World War by the Britishers. The farms were located adjacent to the Trincomalee port, in the north east of the country. The farms would aid in refueling for ships at this natural harbour.

There are 99 storage tanks; each of them can hold 12,000 kilolitres of fuel.

Now these farms would require renovation as they are almost 100 years old. The refurbishing of the tank farms would cost millions of dollars. 

While both sides have been talking for the past 16 months, the Indo-Lanka Accord signed 35 years ago (1987) had this outlined. However, things on this project between the two countries have moved at a slow pace since then. To implement this project Indian PSU Indian Oil Corporation formed a subsidiary Lanka IOC in 2003. Lanka IOC controls 15 tanks and when the deal is signed, it will have access to the rest of them.

The island economy is experiencing an economic downturn, following the pandemic and its impact on tourism. The government is also reeling under a forex crisis. The Lankan government has reached out to the Indian government for a revival package.

The proposal added in 1987 Accord was stalled due to the civil war in Lanka. The refueling station is located in the “China Bay,” is likely to be fully operational once the deal is inked.