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The Sri Lanka Ports Authority (SLPA) is actively searching for a bunkering company to take over all bunkering operations at Hambantota port after poor business practices led to significant losses in 2015.

Call for tenders to operate Hambantota bunkering

Hambantota Port is located at the Southern tip of Sri Lanka, near a key Indian Ocean shipping route. It has potential access to the more than 200 ships which pass by on a daily basis. Previously, the SLPA provided bunkering services to vessel calls, but since April 2015 the company has stopped all bunkering activities at the port.

Currently, the SLPA is calling for tenders from large bunkering companies to take over operations at the port. The deadline for tenders to be sent in is set at August 23rd, an extension from the previous deadline for tender applications. Any company which successfully takes over the operation will have a 25-year lease of all bunkering storage and operational facilities in Hambantota Port.

Requirements for potential tender applications

Companies who wish to send in their application for the tender will be required to meet a list of strict requirements set by the SLPA. Any company wishing to apply for the tender must:

- have handled a minimum of 750,000 metric tonnes of bunker fuels in the past 12 months

- be an active company in the oil industry, specifically in the procurement of bunker fuels and operation of a bunkering terminal with barges

These requirements seem to indicate a desire to bring in a larger foreign bunkering company, despite the fact that Hambantota Port sold only approximately 30,000 metric tonnes of bunkering per month while in operation.

Hambantota Port's bunkering facility consists of 14 bunker tanks able to store a total of 80,000 cubic metres of fuel, with separate storage for 6,000 cbm of LPG.

Previous tender requests called into question

This request for tenders is not new for the SLPA. On February 25th, many investors received the first call for tenders. However, the deadline given for applications was March 10th - only two weeks from the date of the announcement. As a result, many companies did not reply.

Between meetings arranged to discuss the undertaking, facility inspections, technical evaluations, and other necessary steps that need to be taken, most companies ask for around three months to submit a tender application.

SLPA Hambantota bunkering mishaps

For years, the SLPA was in charge of bunkering operations in Hambantota. The operation was shut down in 2015 due to losses of nearly USD $19.9 million plus interest, which is still accruing today. These losses came as a result of a deal arranged by the SLPA for the purchase of around 17,000 metric tonnes of marine gas oil (MGO) on credit.

To date, only around 3,200 metric tonnes of the MGO is said to have been sold. The unsold MGO is adding up costs against the company as the lack of profits are making it difficult to repay the credit owed. It is estimated that more than USD $6 million in accrued interest has been added to the existing debt.

This MGO was imported to Hambantota even after the national oil and gas company, Ceylon Petroleum Corporation (CPC), is reported to have rejected it due to product quality concerns.

The MGO in question still rests within the holding tanks in Hambantota and will be part of the lease deal given over to the successful bunkering applicant.