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Chevron Lubricants Lanka is said to be in talks with the Ministry of Petroleum regarding the extension of the lease on the land where it currently operates a lubricant production facility, according to local reports.

The land lease agreement between Chevron and Ceylon Petroleum Terminal Storage Ltd., which is set to expire on July 13, 2009, has not yet been renewed by the Government of Sri Lanka.

The initial lease for the land was valid for a period of 10 years from July 1994 until July 2004. This was then extended for a further five years until July 13th 2009.

Chevron said that it expects to receive a response from the Ministry of Petroleum over the next two months, after which the company would be making an announcement to shareholders regarding the future strategic plans of the business.

In a stock exchange filing, Chevron said it owned the plant and equipment and that the lease only related to the land.

News of the land lease extension follows comments made by Kishu Gomes, Director of Chevron Lubricants Lanka in a press conference last month, where he stated that under the present circumstances it would be extremely difficult for lubricant players to survive without local manufacturing blending plants in Sri Lanka.

He also said that only about two or three players would be able to weather the storm over the next 3 to 4 years.

In September, market sources also reported that Indian Oil Corporation had temporarily cut prices on its lubricants in a bid to claim a larger market share.

Lanka IOC Plc. Managing Director K Ramakrishnan was reported to have said that the company was offering a five percent discount on lubricants until the end of October.