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Sri Lanka aims to cut oil import dependence

[Reuters, Friday, 5 November 2010 10:04 No Comment]

Sri Lanka aims to double its refining capacity and convert all fuel oil-based power plants to gas to cut its dependence on costly imports, its oil minister said on Wednesday.

Susil Premajayantha also said the island nation was planning to overhaul its tax structure in the budget on Nov. 22 — a move which could mean reduced retail prices of petrol and diesel.

"There will be changes in the tax structure. Price is linked to the tax and if we reduce the tax there will be no losses," the minister told reporters at the Petrotech industry event here.

He confirmed any tax cuts would be passed on to retail customers.

In Sri Lanka, a litre of gasoline is sold at 115 Sri Lankan rupees, he said, adding petrol prices include a "high" value added tax of 25 Sri Lankan rupees.

Sri Lanka will announce policy details on the conversion of the fuel-oil based power plants in the next two weeks, the minister said.

"Cost of this (fuel oil based power) is very costly. We can’t afford it," he said.

The country has capacity to generate 2,100 megawatts (MW) a year, of which 1,200 MW is based on imported fuel oil of about a million tonnes.

Premajayantha said conversion of all the power plants to LNG would take 2-3 years.

Sri Lanka will soon call for preliminary bids to expand the capacity of its sole refinery to 100,000 barrels per day, he said, which would be double current levels.

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