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Trincomalee oil tank farm agreement

Date: 04 January 2022 Tags: India & World


The Indian Oil Subsidiary Lanka IOC will jointly develop the Trincomalee Oil Tank farm project with Ceylon Petroleum Corporation (CPC).



The Indian firm will own 49% stake in the development whereas the CPC will have the majority stake of 51%. The agreement will be for next 50 years.



  • A special purpose company known as Trinco Petroleum Terminals Ltd has been formed by CPC to execute the project.

  • There are a total of 99 oil tanks in the farm which will have to be refurbished. Out of them, 61 will be jointly done, 24 will be developed by CPC and 14 by LIOC.



  • The first idea of jointly developing the oil farms was explored in the exchange of letters between then Prime Minister Rajiv Gandhi and Sri Lankan President J R Jayewardene.

  • For the next 15 years, the agreement remained dormant due to the civil war. The war was halted due to ceasefire agreement.

  • The US was exploring options of making the Trincomalee Harbour as a naval base to aid its war in Afghanistan.

  • The LIOC got a lease for 35 years to use Trincomalee for storing oil mainly for retail purposes. This agreement was to be signed between LIOC, Sri Lankan government and CPC.


Geopolitical aspirations

  • India’s relationship with Mahinda Rajapakse government began deteriorating and the agreement failed to materialize.

  • LIOC got a foothold in retail petroleum market and expanded its investments in Trincomalee. It also got tax benefits as a foreign investor.

  • India seriously started to plan for more investment after China gained the Hambantota harbor and began developing it.


The re-start of project

  • Sri Lanka is in middle of a foreign exchange crisis. Due to shortage of Forex reserves, it cannot import goods such as fuel, food etc, which has started inflation.

  • During the recent visit of the Finance minister to India, a four-point deal was offered to the country.

  • It included a line of credit for fuel purchases from India, a line of credit for food imports from India, early modernisation of the oil storage facility at Trincomalee, and Indian investments.


Importance of Trincomalee

  • The port has a pre-World war II era oil storage facility that can store 1 million tons of oil, more than the demand in the island-country.

  • LIOC officials had demanded refurbishing the tank farm as an extension of Indian Oil storage on the Indian east coast.

  • The facility could be used for refueling and serves as a strategic deep-water harbor. India does not want a third country to enter the facility.

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