Cash-strapped Sri Lanka shuts oil refinery

COLOMBO, 16 Nov 2021:

Dwindling foreign currency reserves yesterday forced Sri Lanka to temporarily shut down its only oil refinery, as the island nation struggles to deal with a looming economic crisis.

Energy minister Udaya Gammanpila told reporters the government will use its limited foreign currency reserves to import essential goods.

He added that Colombo was holding talks with other countries to get loans, warning that process was “challenging” but the government remained hopeful.

“We received US$300 million from Bangladesh and US$350 million from China but this is not enough,” the minister said, explaining that according to the latest statistics, Sri Lanka consumed fuel worth US$350 million every month.

The Sapugaskanda refinery will remain closed for at least 50 days, but Gammanpila claimed that would not result in fuel shortages for the country, as the refinery only converts 43% of its crude oil to petrol and diesel, while the rest is turned to furnace oil (37%) and aviation fuel (19%).

Due to ample rains across Sri Lanka over the past two weeks, the country has shifted to mostly relying on hydroelectric power.

The closure of the refinery is the latest measure by Sri Lankan authorities to conserve their foreign currency reserves, after they restricted the import of some goods, while vehicle imports have been completely halted.

One of the major causes of the lack of foreign currency has been the drastic drop in tourism due to the Covid-19 pandemic, as the island nation remained fully closed for months for a sector that has been crucial for its economy.

The government began to gradually lift its latest lockdown on Oct 1, after imposing restrictions in August to check the spread of the virus as the country was hit by a fresh wave of infections.