CPC pins hopes ...

refused to open letters of credit.

“To circumvent this problem, the Iranians were willing to give us loans to buy their oil. But we faced the problem of finding vessels as insurers refused to provide P&I (protection and indemnity) cover for the ships. Once, we sent our own vessel to Iran, but we had to return empty as we could not get P&I insurance. We incurred huge losses. Iran then offered to send crude using its vessels, but our ports were not geared to anchor VLCs (very large cargo carriers),” Mr. Silva said.

The CPC managing director said Sri Lanka was in a desperate situation unable to run its Sapugaskanda oil refinery which had been fine tuned to handle Iranian crude.

Prior to the sanctions, Iran provided 93 per cent of Sri Lanka’s crude requirement and had been selling oil under a seven month credit facility.

“The refinery was closed twice last year and twice this year for want of crude that fits its specifications,” Mr. Silva said. He said at the moment the refinery was running smoothly but a trade union source said nobody knew for how long.

The CPC Managing Director said when Sri Lanka could not buy Iran crude though the sanctions allowed Sri Lanka to buy a reduced quantity as a reward for the country’s compliance with the sanctions, “we turned to other suppliers. But it only worsened the problem.”

He said the corporation bought Arabian Light but the refinery ran into technical glitches because it had high sulphur content unlike Iran crude. The CPC then bought Oman crude but it produced more residue than oil. “Now we use Abu Dhabi crude and blend it with other types to run the refinery,” he said.

Mr. Silva said the sanctions also scuttled Sri Lanka’s plans to modernise the refinery with more than US$ I billion Iranian aid. Iran cited technical problems for the delay in disbursing the funds and later urged Sri Lanka to meet 30 per cent of the cost of the project. Analysts believe, however, the delay was largely due to the sanctions.

“We have been hit from all sides,” Mr. Silva said referring to the sanctions and criticism at home.

He said the Sapugaskanda refinery was a national asset and there was national urgency to modernise it.

He said there were several proposals and various parties had shown an interest in the project.

He added a decision would be taken soon. “We need to modernise the refinery. It is an urgent need. We should modernise it in such a way so that it will be able to handle at least 20 varieties of crude.”