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Ensure
true liberalisation
of petroleum industry-Reckerman
As
Sri Lanka moves towards the privatisation of the petroleum industry
(involving the CPC's petroleum business), the government should ensure
transparency and true liberalisation in this sector unlike what
happened in the LPG and lubricant privatisation processes.
Furthermore, the petroleum regulatory authority, which is expected to
be appointed in due course, must ensure justice and fair play in the
industry. Costing and pricing mechanisms as well as trading practices
will all fall under the purview of the regulator, who will have wide
powers to ensure a level playing field.
So
said CEO of McLarens Lubricants Ltd., Trevor Reckerman in an interview
with The Sunday Leader. McLarens Lubricants is the local partner of
ExxonMobil - the world's largest petroleum company ranked number one
in fortune 500 profit and number three in revenue.
He
noted that in the past, unfair practices had been followed. For
example, when the Ceylon Electricity Board (CEB) called a tender in
June 2001 for supply of lubricants to the Sapugaskanda plant, McLarens
Mobil subbmitted the best offer. However, this tender was cancelled
and no legitimate reason was given. Reckerman said they made several
representations to the line ministries and the CEB, but to no avail.
As a result, they had been compelled to seek legal redress. This case
in now pending. Due to such issues, global oil majors such as
ExxonMobil, Shell and BP have had misgiving about government policy
regarding their industries. This was one reason why ExxonMobil had
reservations about submitting an expression of interest for the third
party role in the petroleum privatisation. However, McLarens has
submitted expressions of interest on behalf of certain foreign
investors.
Reckerman
said the expressions of interest called from a prospective third party
recently involved a very transparent process. He added that this
transaction will be undertaken via the Colombo stock Exchange, and the
highest bidder should be selected as the third player.
The
successful third party will acquire 100 CPC filling outlets. The other
200 outlets are held by Ceypetco and Lanka Indian Oil Company (LIOC).
The
party which successfully bids for the remaining 100 CPC filling
stations will be shareholders (together with LIOC and Ceypetco) of the
common user facility company which will be established shortly. This
company will operate the storage tanks and pipeline network, together
with other amenities.
Reckerman
said that the lubricant industry in the past found the Public
Enterprise Reforms Commission (PERC) to be very uncooperative. He
noted that after Caltex was awarded the lubricant monopoly, other
entrants were given a 5-year licence upon the payment of Rs. 5
million. "However, PERC did not thereafter assist the new
players, and left them to the mercy of operating in unfavourable
market conditions such as a wide duty differential and CPC retail
outlets being exclusively secured for Caltex," he added.
Caltex
still dominates the market, and the other players together enjoy a
market share of just 5%, and a few have even suffered losses year on
year.
Reckerman
warned that once the market is fully liberalised next July, a flood of
cheap petroleum products of dubious quality could enter the
marketplace. He said the authorities should ensure that the American
Petroleum Standards are adhered to. "The regulator should ensure
that standards are maintained so that the country's machinery and
transport infrastructure do not suffer the consequences," he
stated.
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