Sri Lanka stops Iranian crude oil imports ahead of American sanctions

Sri Lanka has stopped crude imports from Iran and is actively switching to other crude grades as South Asian countries including India, significantly restrict supply in anticipation of US sanctions against Tehran.

“We stopped as soon as the sanctions were announced. We didn’t buy [directly] from Iran. We buy from Singapore, Dubai, Fujairah,” SAID Sri Lankan Petroleum Resources Development Minister Arjuna Ranatunga.

“We’re looking at signing government-to-government agreements over the next couple of months. We’re looking at long term-agreements.”

Sri Lanka, one of the smaller South Asian oil consumers, was importing nearly all of its 50,000 barrels per day from Iran, which was then refined at the country’s sole refinery built to run on light crude imported from the Middle Easte producer.

Following the threat of snapback sanctions against Tehran by the White House, Sri Lanka’s state oil company had earlier considered paying for its oil imports and debts with tea. The country is the world’s second-biggest producer of the commodity, behind Kenya. Iran, a big consumer of tea, imports 90 per cent of the commodity from India and Sri Lanka.

Colombo, however, is close to securing alternative supplies from other producers to ensure it does not fall foul of sanctions, said Mr Ranatunga.

“We have identified a couple of crude [grades] and we have already started using them. That is one of the problems we have because the crude is very expensive as well. So we’re looking at [securing] cheaper crude and we’re very successful at that,” he said.

Sri Lanka drew up contingency plans in 2012 to import oil from Saudi Arabia and Oman, when nuclear-related sanctions were imposed on Tehran.

Mr Ranatunga declined to comment on where Sri Lanka is currently importing crude from.

The country is still on track to expand capacity at its Sapugaskanda refinery to 110,000 bpd, a scheme that was earlier planned to be developed by Iran, said the minister. But finding a replacement is expected to take up to four years, he said.

Sri Lanka, which announced a licensing round earlier this year, has signed an agreement with US energy services firm Schlumberger.