Sri Lanka in talks with Qatar for fuel, LNG supplies

Sri Lanka has reached out to Qatar for supplies of oil products, LNG and LPG in a bid to overcome fuel shortages in the country, potentially creating new trade flows between the two nations.

"Met with HE [his excellency] Saad Sherida Al-Kaabi, the minister of state for energy affairs and the president and CEO of Qatar Energy to discuss the supply of petroleum products, LPG and LNG to SL [Sri Lanka] to overcome the energy crisis with the assistance of Qatar Energy and the Qatar Development Fund," Sri Lanka's energy minister Kanchana Wijesekera said on 28 June.

This is likely the first time that Sri Lanka is seeking to import LNG, although it does not yet have an LNG import terminal. The country plans to launch one next year, although it is unclear if the terminal will come on line in time to help it resolve its fuel crisis. Qatar is the world's second-largest LNG exporter with 77mn t/yr of capacity. Most of its exports headed to China in December, latest GTT data show.

This is also likely the first time that Sri Lanka is seeking LPG from Qatar, the biggest Middle Eastern exporter of the fuel, with most of its 11mn t/yr of exports currently heading to India and southeast Asia. Sri Lanka imports most of its LPG, mainly from Iran, to meet around 500,000 t/yr of domestic demand. Sri Lankan LPG distributor Laugfs Gas owns and operates the country's largest import-export terminal at Hambantota port, with a current storage capacity of 30,000t.

Seeking fuel

Sri Lanka has historically not imported oil products from Qatar as well, data from oil analytics firm Vortexa show. But it receives supplies from other Middle East countries, such as fuel oil from the UAE, its top supplier since at least June 2019.

Qatar exported an average of around 104,000 b/d of gasoil and 12,000 b/d of gasoline last year, Vortexa data show. Sri Lanka's diesel imports currently come from India, Singapore and the Middle East, totalling 39,000 b/d last year. It typically sources gasoline from India and Singapore, with imports totalling 22,000 b/d last year. Sri Lanka consumes around 110,000 b/d of oil products but its sole 50,000 b/d Kelaniya refinery produces only around 35,000 b/d.

Sri Lanka has been actively seeking spot diesel, although it is struggling to find suppliers because of financing issues, according to market participants. The country is facing its worst foreign exchange crisis since gaining independence in 1948, resulting in fuel, food and power shortages.

Sri Lankan importer Lanka IOC (LIOC) is now having to restrict gasoline sales at retail outlets across the country, limiting two-wheelers, three-wheelers and four-wheelers to just 1,500 Sri Lanka rupees ($19), Rs2,500 and Rs7,000 worth of fuel each day. The restriction goes into effect immediately, LIOC said on 28 June, without giving an end date.

Sri Lanka will also allow more companies from oil-producing nations to enter the domestic market, currently dominated by LIOC and state-controlled importer Ceylon Petroleum (Ceypetco). LIOC is the Sri Lankan subsidiary of state-owned Indian refiner IOC.

"Cabinet approval was granted to open up the fuel import and retail sales market to companies from oil producing nations," Wijesekera said on 28 June. "They will be selected on the ability to import fuel and operate without forex requirements from the CBSL [Central Bank of Sri Lanka] and banks for the first few months of operations."

By Reena Nathan, Cara Wong, Frances Goh, Rou Urn Lee, Pratima Pareek and Sarah Giam