Colombo and Delhi sign deal on Trincomalee oil complex
The contract concerns the joint development of a storage facility on Sri Lanka's east coast. Indian funding counteracts Chinese influence. The turning point came with the economic crisis of 2021: Colombo will need 4.5 billion dollars this year to repay its foreign debts.
Colombo (AsiaNews) - Sri Lanka and India have signed an agreement to develop the Trincomalee oil complex with 99 tanks, a capacity of almost one million tons. The agreement involves the Indian Oil Corporation (Ioc) and the Ceylon Petroleum Corporation (Cpc).
The Trincomalee oil depot was built by British settlers during the Second World War as a refuelling station. It is located in China Bay, close to the internationally sought-after natural harbour. The storage facility was served by the port call, which is located on the east coast of Sri Lanka, about 350 kilometres north of the main east-west Indian Ocean shipping route.
Considered a new milestone in the economic and energy partnership between India and Sri Lanka, the oil tank storage contract was signed on 6 January, amid growing concern over increased Chinese influence in the island.
India and Sri Lanka will share the reservoirs: 14 will depend on the Ioc on the basis of a 50-year lease, 24 will be operated by Sri Lanka and 61 will be jointly developed by the two countries. India will own 49% of the shared tanks and the agreement is considered a major victory for Delhi.
The new contract brought to an end an earlier framework agreement signed by Colombo, Lanka Ioc (Lioc) and Cpc in 2003, which provided for the lease of all the tanks to the Sri Lankan company. Currently, Sri Lanka holds a share of 85 tanks in the plant.
The project will increase energy security for both countries, as Ioc plays a key role in the distribution of petrol to the public in Sri Lanka, and lay the groundwork for further economic cooperation.
Although talks to redevelop the Trincomalee complex have been held intermittently since 1987, the big breakthrough came last year with Sri Lanka's economic crisis. India had sent Foreign Minister Harsh Vardhan Shringla to Sri Lanka in October 2021 and visited the tanks before sealing the deal. As analysts pointed out, the move consolidates India's role in the controversial project since the 1987 Indo-Sri Lanka agreement.
According to experts, with the understanding Trincomalee will be able to become an energy and transport hub in the island's eastern district. The project will advance Sri Lanka's request for financial assistance, which is crucial in the current context of acute economic crisis.
According to trade unions, the island nation has closed its only oil refinery due to its inability to pay for crude oil. Sri Lanka is negotiating a 0 million credit line from India's Exim Bank to purchase fuel from Indian suppliers. This is in addition to a loan request to cover the import of essential foodstuffs, medicines and other basic items from India, including a 0 million currency swap under the South Asian Association for Regional Cooperation.
Since 2021, Sri Lanka has been facing a foreign exchange crisis that has caused the worst economic meltdown since the 1970s, resulting in restrictions on imports of essential foodstuffs, the prices of which have skyrocketed. In 2022, the country will need USD 4.5 billion to repay its foreign debts.