COLOMBO: Sri Lanka has reached out to several companies suggested by Russia’s embassy in Colombo to buy crude oil, Energy Minister Kanchana Wijesekera said on Sunday, in an attempt by the debt-ridden island nation to get oil on credit to keep its only oil refinery running.
Wijesekera told the media that the Russian ambassador in Colombo “asked me to send the replies of the company, and he will also intervene in the process”. The minister said that he had replies from the Russian companies suggested by the ambassador, Sri Lanka’s Economy Next news portal reported.
“Also we have sent the message to the Sri Lankan Ambassador in Russia, Janitha Liyanage,” the minister said, adding that the process was taking time. Sri Lanka has already bought one shipment of Siberian crude from Dubai-based Coral Energy in the international market, officials have said.
However, the Russian state companies are reportedly giving crude at lower prices to countries that can afford to pay. Sri Lanka’s sole refinery is now running with the last Siberian crude shipment. Sri Lanka is currently facing its worst economic crisis since independence from Britain in 1948.
Due to monetary instability triggered by central bank money printing, Sri Lanka has forex shortages, making it difficult to find dollars at fixed prices for large import bills.
The economic crisis has prompted an acute shortage of essential items like food, medicine, cooking gas and other fuel, toilet paper, and even matches, with Sri Lankans being forced to wait in lines lasting hours outside stores to buy fuel and cooking gas.
Lanka is trying to get crude on credit as it had done during previous currency crises when the central bank printed money and triggered forex shortages. Sri Lanka’s oil bill has risen to USD 550 million a month by June 2022 and the energy ministry has been talking to the central bank to get dollars.
The central bank has run out of reserves after two years of money printing but the agency is yet to shift to a free float which will balance outflows to inflows. Sri Lanka owes oil firms USD 730 million for oil imported on credit, and they are unwilling to supply fuel without upfront payments or deposits, Wijesekera said.
“For crude oil also we have contacted several countries. Even though we have requested firms, due to the financial situation and the ratings of the banks in the country most companies do not agree to get into loan schemes to get oil,” Wijeskera said, adding that he had discussions with embassies of several other countries.
India has helped Sri Lanka with thousands of tonnes of diesel and petrol, apart from food and medical supplies, to help ease the acute fuel shortage in the debt-ridden island nation. Sri Lankan Prime Minister Ranil Wickremesinghe said on Wednesday no country except India is providing money to the crisis-hit island nation for fuel.
With the Sapugaskanda refinery being reopened, the available crude stock is being used in the minimum amount to continue the operations of the refinery. The subcommittee also permitted the import of another four ships of crude oil, Wijesekara said. “We can use them in the refinery to increase the current capacity. Until then we are keeping the production at a minimum level,” he said.
According to Wijesekara, currently around 350 MT Petrol and 600 MT Diesel are being produced by the refinery along with furnace oil and LP gas. “A ship needs around USD 80 million. We have got one company through the tender process for three ships,” Wijesekara said, adding that he had given the permission for three other companies to import crude oil.
He added that only one company has however agreed to export two ships on June 28 and 29.
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