Overview of the lpg industry in Sri Lanka

· First Oil refinery was setup in 1960 and started production of LPG

· Ceylon Petroleum Corporation started a small pilot project to distribute LPG in the country

· Nationalized Colombo Gas & Water Works assigned to undertake LPG business

· State monopoly prevailed until 1995 under Colombo Gas Company

· CGC was privatized in 1995 with 51% divesture to Shell Gas with a 5 year monopoly

· Second player, Laugfs Gas, entered the market in 2001

Sri Lankan LP Gas Industry ‐ Present

Two Industry Players – “Litro” & “Laugfs”

· AAC – 189,000 Mts ( Year 2011)

·  Expected to reach 225,000 mts in year 2015

· Three market segments: Domestic – 169,000 mts – 88%

· Only 30% households use LPG for cooking

· Industrial ‐ 20,000 mts – 11% 

· Transport ‐ 2,000 mts ‐ 1%

Future industry prospects

Industry will grow – 20% annually for next few years

· Emerging markets in the North and East

· High Growth in the Tourism sector

· New investments in the Industrial sector

· Exports growth will need more energy

Background

Ceylon Petroleum Corporation (CPC) at present produces around 30 MT to 50 MT of LPG per day at its Sapugaskanda Refinery as a light product generated during the crude oil processing operation.

The current volume produced at the Refinery is sufficient to cater to about 6% of the requirement of the country. At present, CPC sells this production exclusively to M/s Laugfs Gas Pvt. Ltd and M/s Litro Gas Lanka Limited in bulk form at the price equivalent to the previous month average of "Saudi Aramco contract price" plus a fixed amount of 100 USD per MT.

It is to be noted that there had been an attempt by CPC to enter into the LPG business. in the past after procuring a gas cylinder filling plant during years 2008-2009. Unfortunately, CPC couldn't execute this activity due to restrictions in the agreement with the LPG bulk purchaser at that time. Further the brand-new plant having a filling capacity of 400 Nos. of 12.5 Kg cylinders per hour has been in idling state since then.

In this context, CPC has formulated a business plan to enter into the retail sale of LPG as the third player in Sri Lanka utilizing the above-mentioned plant and LPG produced at the Refinery.

Invitation

v Hence, Ministry of Petroleum Resource Development is now Calling Expression of Interest from interested parties to carry out LPG Business on Build Operate and Transfer (BOT) Model with 51% shares to Ceylon Petroleum Corporation.

Following services/equipment/products are available with CPC as a partner for the entire operation:

· 30 to 50 MT (approximately) of LPG Gas produced at the Sapugaskanda Refinery at "Saudi Aramco contract price".

· The brand new Gas Cylinder Filling Machine having a filling capacity of 400 Nos. of 12.5 Kg capacity cylinders per hour.

· Facilities for the sale of LPG Cylinders in suitable locations at CPC owned Filling Stations Island wide.

· The land at Sapugaskanda refinery for operational activities of LPG.

· Additional land at Muthurajawela for any development related to LPG.

· "LANKA" brand name.

Whereas the selected partner is expected to provide all other facilities required for the LPG business which should include the following:

· Gas Cylinders required for distribution and sale of LPG: 100,000 Nos. of 12.5 Kg and 50,000 Nos. of 5Kg Gas Cylinders.

· Distribution of Gas Cylinders to dealers and sale.

· Infrastructure facilities such as buildings, pipelines, stores, Air Compressors, Small Boilers etc. on the land given by CPC.