Sri Lanka's state-owned petroleum utility will enter the liquid petroleum gas (LPG) market by June using fuel dealerships, a top official said, while plans are underway to boost gas production.
Ceylon Petroleum Corporation (CPC) now produces about 60 metric tonnes of LPG a day or about 10 percent of the island's requirement, which it sells to private player Laugfs Gas.
Petroleum minister A H M Fowzie told the cabinet of ministers last week that CPC is starting a gas recovery unit to increase output at its refinery in Sapugaskanda, north of Colombo.
The recovery unit will see production rising from 18,000 metric tonnes to 36,000 tonnes a year or about 20 percent of the country's requirement.
The total LPG requirement of the country is about 160,000 tonnes a year of which 75 percent is for domestic use and the balance for industrial use.
"We're now in the process of trying to distribute LPG on our own," CPC chairman Ashantha de Mel told LBO in an interview.
The CPC would distribute gas through its own dealer network of around 700 outlets.
The CPC now supplies Laugfs Gas at around 200 dollars per tonne less than other suppliers but the cost benefit has not been passed on to consumers as much as the government had hoped for, de Mel said.
"Now we supply Laugfs at the Saudi Aramco price without the freight and port charges in Sri Lanka. It means we're giving a benefit of around 4.4 million dollars a year to Laugfs but that benefit is not going through to the consumers."
De Mel said the government was keen to give consumers "some sort of cost benefit" that accrues from the limited local production of LPG.
"The government asked us to see if we can supply gas at a cheaper price. If we give gas even at the same price we're giving Laugfs we can give a cylinder at a 150-rupees discount."
The CPC is in the process of calling for tenders to buy cylinders and hopes to be in the business around June.
De Mel also said the CPC plans to double the capacity of its 50,000 barrels per day refinery after which gas production would rise even further.
"With the expansion of our refinery LPG production should go up to 250 metric tonnes a day, about 40 percent of the country's present demand."
The LPG market is currently dominated by multinational Shell with Laugfs as the second player.
The refinery expansion, for which a feasibility study has now started with Iranian help, is expected to take at least five years to complete.
Sri Lanka's LPG gas market started to grow fast after a state monopoly Colombo Gas Company, was sold to Shell.
Though prices increased under Shell frequent shortages of cylinders that put existing customers in difficulty and kept potential ones away ended after privatization, allowing more people to use cooking gas.
