Iran’s offer to expand Sapugaskanda Refinery rejected - report
July 17, 2011 06:14 am
The Sri Lankan government has rejected Iran’s offer to assist in expanding the island’s Sapugaskanda oil refinery capacity from 50,000 to 100,000 barrels per day over a dispute on the project’s financing, foreign media reports.
A government official with knowledge of the project speaking on condition of
anonymity said that the deal breaker was Iran’s insistence that Sri Lanka
commit $500 million of its share of the cost up front, but the Treasury baulked
at immediately committing such a vast sum.
The source added that that the Treasury would have acceded to the Iranian
request if it at least had been on a pro rata basis based on the progress of
the project, but backers of the refinery expansion now need to find an
alternate financing source, the Island Online reported.
In the interim the situation at Sapugaskanda is becoming more strained as the
refinery is finding it increasingly difficult to produce gasoline and diesel
under ever more stringent standards to meet environmental concerns, which has
resulted in the refinery diminishing its output to 40,000 barrels per day.
According to environmentalists, a law imposing a standard of 500 parts per
million sulfur content for auto diesel became law in January 2007, but it has
not been fully implemented due to the inability of the Sapugaskanda refinery to
produce fuel meeting the new standard, Oilprice.com reports.