July 30, Colombo: Indian Oil Corporation (IOC) will set up a refinery in Sri Lanka with an investment up to US$ 3.6 billion, a report in Business Standard said.
IOC, which already has a venture in Sri Lanka through its subsidiary Lanka IOC, operates 10 refineries in India and the one in Sri Lanka will be its first refinery outside India. IOC plans to set up the refinery in a joint venture with the Sri Lankan government.
The capacity of the Sri Lankan refinery is expected to be 5-9 mtpa (million tonnes per annum).
A senior IOC official has told the Business Standard that the company has done the analysis and has first-hand information on the kind of refinery they plan to set up in Sri Lanka.
"We are in discussions with the Sri Lankan government for tax concessions, a holiday for customs and excise, and other benefits that a refinery should accrue to us," the official has said.
According to the official the Sri Lankan government has already agreed to provide land and the new refinery is to be built near the existing Sapugaskanda refinery.
IOC's subsidiary in Sri Lanka, Lanka IOC is the only private oil company in Sri Lanka operating 157 fuel retail outlets.
Sri Lanka's 43-year-old refinery daily produces 50,000 barrels of fuel from Iranian light crude oil. It has a capacity of 2 mtpa whereas the fuel consumption is 4.5 mtpa, requiring 2.5 mtpa of imports.
The Sri Lankan government has launched the "Sapugaskanda oil refinery expansion and modernization project" to expand the production capacity to 100,000 barrels per day.
According to IOC analysis, Sri Lanka's fuel needs are estimated to rise to 6.5 mtpa by 2020 and 8.5 mtpa by 2030. Instead of importing fuel, the country plans to import crude oil and process it.
Setting up the refinery in a joint venture with the Sri Lankan government would allow IOC easy clearances along with the government's commitment, the report said.
"Keeping in mind its oil security, the Sri Lankan government has been looking at setting up another refinery. They were looking at expressions of interest from various countries. Since we were present in Sri Lanka, we held discussions with them. We have done the preliminary survey and have to see what kind of refinery would make economic sense," the official has said.
"Considering Sri Lanka's fuel consumption targets for 2020 and 2030, we may look at either setting up a five-mtpa refinery or a nine-mtpa one. Accordingly, we'll select the type of crude to be processed," the official has said.