Despite the visit of the Indian Foreign Secretary S.Jaishankar accompanied by a high-level team from the Indian Oil Corporation over the weekend, differences between the Lanka IOC (LIOC) and the government of Sri Lanka over the Trincomalee oil storage tanks not resolved.

New India Express claims that this is due to “technical and legal issues” which have been preventing the full use of the giant oil tanks remain unresolved though the tanks were handed over to the LIOC ,a subsidiary of IOC ,way back in 2002 for joint development with the Ceylon Petroleum Corporation (CPC).

However, the government of India unofficially warned Sri Lanka that the IOC-CPC deal was the result of the India-Sri Lanka Accord of 1987 and was a government to government agreement which cannot be unilaterally abrogated. The Sri Lankan government thereafter stopped talking of a takeover but full development of the tanks did not proceed as originally envisaged.

But India was keen on participating in the energy sector in Sri Lanka and had an eye on Trincomalee for development as an Indian Ocean energy hub.      

The tank farm consisting of 99 tanks is located on an 850-acre block of land. Each of the tanks has a holding capacity of 12,100 metric tons of oil. The total storage capacity is about one million metric tines.

After the change of government in Sri Lanka in January 2015, Prime Minister Ranil Wickremesinghe took the proposed an India-Sri Lanka joint venture to  develop 30 storage tanks in the first phase. The Government proposes to establish a new venture between Lanka IOC and the Ceylon Petroleum Corporation (CPC) to develop the 84 tanks located within the Trincomalee Upper Tank Farm. However, the resoration will cost a lot of money.

The Minister of Petroleum Resources Development, Chandima Weerakkody, told Parliament that  CPC had said that nine could be used after minor repairs. The government wants to increase the total storage capacity to 90,000 MT, enabling it to benefit from the global oil price fluctuations.