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The Sri Lanka Ports Authority (SLPA) plans to modernize the tank farm it is scheduled to take over at the port of Colombo on September 12th, according to local sources.

The storage facility, which has been occupied by Lanka Marine Services (LMS) to store product for its bunkering operations at the port of Colombo, is set to be handed over to the SLPA in two-days' time.

The port authority is now understood to be preparing to invite expressions of interest from companies to modernize the facility and replace old pipelines. Local sources report that the SLPA aims to have the old pipelines replaced by the end of this year.

The decision to transfer ownership of the storage facility to the SLPA came during a ruling by the Supreme Court in July, where it decided that there had been serious irregularities in the manner in which LMS had been privatized by John Keells Holdings Ltd.

The court subsequently ordered LMS to vacate the tank farm in Colombo and hand the land over to the SLPA. It also called for the premises to be used by all licensed bunker suppliers to stimulate competition in the local bunker market.

SLPA officials have reportedly already drawn up a set of cost-based tariffs for use of the facility by competing suppliers in Colombo. The SLPA is also said to have held meetings with eight holders of valid bunker licenses who have formed an association of bunker suppliers to decide how to use the tanks and pipelines.

Earlier this year, Bunker Index reported thaht Sri Lanka is converting part of another tank farm in Muthurajawela to store bunker fuel as part of a project that aims to link all the main petroleum facilities with each other and with the port of Colombo.

The facility is jointly owned by Ceylon Petroleum Corporation (Ceypetco) and Indian Oil Corporation through Ceylon Petroleum Storage Terminals Ltd. (CPSTL).

The Muthurajawela terminal currently only stores diesel and kerosene. In March, officials at CPSTL were said to be planning to convert five tanks to store bunker fuel or furnace oil and three tanks to store petrol. The conversion project would then enable the terminal to supply a power plant in nearby Kerawalapitiya and vessels calling at the port of Colombo via the pipelines that are being built.

Meanwhile, development of the new bunkering terminal at Hambantota, which commenced in December 2007 and is scheduled to be completed in 39 months, is also set to lead to increased competition and to provide a major boost to the Sri Lankan bunker market. The terminal will be designed to handle up to 500,000 metric tonnes of oil products a year.