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Sri Lanka Ports Authority is set to begin operating as the sole bunker supplier at the south coast port of Ruhunu Magampura Mahinda Rajapaksa - also known as Hambantota - in June this year.

Rohitha Abeygunawardene, Ports Development Deputy Minister, said that construction work on a new bunker storage terminal will be completed by May. The new tank facility will have the capacity to store up to 82,000 metric tonnes of marine fuel.

Abeygunawardene pointed out that Sri Lanka Ports Authority (SLPA) would be the only licensed bunker supplier at Hambantota and that the supply of marine fuels is one area that will not be open to foreign investors.

Other services including bulk cargo handling, storage facilities, warehouses, transshipment will be open to foreign investments. Abeygunawardene said that 27 foreign investors have already expressed their willingness to invest US$ 975 million in industries such as cement, tea, and gas. It is hoped that the port will reach up to four million tonnes of storage for bulk transshipments.

The China-financed Hambantota Port Development project commenced on January 15th 2008 and has proceeded ahead of schedule despite reports in September 2008 that the project was facing suspension due to a cash flow crisis when project managers China Harbour-Sinohydro Consortium issued a letter to Sri Lanka's Ports and Aviation Minister, Chamal Rajapaksa, demanding payment.

The total cost of the first phase of the project is estimated at US$360 million, including US$76.5 million for the bunker terminal.

Abeygunawardene said that bunkering would be an important way of earning the money required to pay back the Chinese loans.

It is hoped that together with Colombo, Hambantota will become a leading port in the country. However, there are also fears that the port may not earn enough to help repay the Chinese loan if cargo volumes are not sufficiently high.

Lack of income could lead to the government requesting that shippers shift container handling from Colombo to Hambantota, which shipping firms may be reluctant to do if it is not economically viable.

Local sources have also pointed out that Sri Lanka would not benefit financially from shifting business from Colombo to Hambantota and that the country's economy will only benefit if Hambantota generates new business.