The signing of the deal comes ahead of Chinese Foreign
Minister Wang Yi’s visit to Colombo this weekend, with China also vying for
clout in Sri Lanka.
Sri Lanka is facing its worst financial crises in
decades with its foreign exchange reserves dwindling and nearly $4.5 billion
worth of debt repayments due in 2022, prompting it to look at innovative ways
to bring in foreign exchange.
Previously Sri Lanka had agreed to lease all of its 99
tank oil farms to India in 2003.
According to the new pact, Lanka IOC will have 14
tanks on a 50-year lease while its joint venture with state-run Ceylon
Petroleum Corporation (CPC), the Trinco Petroleum Terminal Pvt. Ltd, will
develop 61 oil farms. CPC will use the remaining 24 tanks.
“This agreement will nulify the lease agreement
entered into by the two countries in 2003 and bring the tank farm under a new
governance structure,” Sri Lanka’s energy ministry said in a statement on
Prior to Thursday’s agreement Lanka IOC was operating
15 of the 99 storage tanks in the eastern port of Trincomalee. The Sri Lankan
government had been considering developing the rest to increase its fuel
Indian prime minister Narendra Modi during a visti to
Sri Lanka in 2019 said the project could help the island become a regional
Successive Indian and Sri Lankan governments have been
attempting since 1987 to divide up ownership and development of the World War
II era tank farm at Trincomalee, a strategically important harbour off the
island’s scenic east coast.
Sri Lanka is located on a shipping route between Gulf
oil exporters and Asian consumers, and Trincomalee served as a crucial Allied
supply hub during World War Two.