Sri Lanka signs oil terminal agreement with India | Economic news

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BHARATHA MALLAWARACHI, Associated Press

COLOMBO, Sri Lanka (AP) – Sri Lanka has agreed with India to jointly redevelop a strategic oil terminal consisting of nearly 100 large oil reservoirs, Energy Minister Udaya Gammanpila said on Tuesday.

He said Cabinet had approved the proposal and an agreement with India is expected to be signed this month.

The project comes amid growing concerns about China’s growing influence in this Indian Ocean island nation.

The facility, with a capacity of 8 million barrels of oil, is located on the east coast of Sri Lanka, close to the strategically important port of Trincomalee, considered one of the best natural harbors in the world.

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The cost of the project was not available.

According to the agreement negotiated by the Sri Lankan and Indian authorities for more than a year, 24 of the 99 tanks will be supplied to the Sri Lankan state-owned Ceylon Petroleum Corp.

Another 14 tanks that are currently in use by Lanka IOC, a subsidiary of IndianOil, will again be leased to the same company for 50 years. The remaining 61 reservoirs will be managed by Trinco Petroleum Terminal Ltd, 51% owned by Ceylon Petroleum and 49% by Lanka IOC.

The plan is to modernize an oil terminal that was built by the British during World War II. It has 99 reservoirs spread over 827 acres. Originally it had 101 tanks, but two were destroyed in a Japanese attack in 1942. Most of the tanks are in poor condition, according to local media.

Sri Lanka gained independence from Britain in 1948, but the oil reservoir remained in British ownership until the government bought it for £ 250,000 in 1964.

India views the Indian Ocean as its strategic backyard and is troubled by rival China’s growing economic and political influence over Sri Lanka.

Likewise, China regards Sri Lanka as an essential link in its vast global initiative to build “Belt and Road” infrastructure. It has provided billions of dollars in loans for Sri Lankan projects over the past decade. The projects include a seaport, an airport, a port city, highways and power plants.

Critics say the projects funded by China are not financially viable and Sri Lanka will struggle to repay the loans.

In 2017, Sri Lanka leased a Chinese-built port near busy shipping lanes from a Chinese company for 99 years to ease the heavy burden of repaying the Chinese loan used to build it.

Last year, India’s Adani group reached an agreement to develop a container terminal in Colombo, the capital, with a Sri Lankan company and the Sri Lanka Ports Authority. China also operates a container terminal at the same port as part of a joint venture with the Sri Lanka Ports Authority.

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