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The Sri Lanka Ports Authority (SLPA) is proceeding with plans to commence the sale of marine fuel during the first quarter of 2011, according to local sources.

As reported by Bunker Index in December 2009, the SLPA is expected to begin sellling bunker fuel off Hambantota, where a new port and bunkering terminal is being built a few miles away from the principal sea route across the Indian Ocean.

The SLPA is also expected to carry out inner harbour bunkering at Hambantota to complement its offshore supply operation.

It is understood that the SLPA is planning to set up a subsidiary in Hambantota and hire barges to store and supply fuel to passing ships until onshore storage tanks are built as part of the Hambantota port project.

The SLPA is expected to initially target small and medium-sized vessels during the initial stages of the bunker supply project. Larger container vessels do not tend to use bunkering services in nearby Colombo, which is limited mainly to small feeder vessels calling at ports in the Indian subcontinent.

SLPA officials are reportedly expecting initial demand at Hambantota to be limited, especially given the lack of storage. However, efforts will be made to keep prices as competitive as possible in relation to nearby ports in the region.

Bunker prices would be on a break-even basis during the promotional phase of the bunkering facility at Hambantota, according to previous comments made by officials.

The first phase of the Hambantota project commenced on January 15th 2008 and was initially scheduled to be completed by April 15th 2011. However, construction work has proceeded ahead of schedule and the port is now expected to be open for business in November 2010.

The project will consist of two 600 metres of general purpose berths, a 310-metre bunkering berth and a 120-metre small craft berth.

The port will also include a bunkering facility and tank farm, which will contain 8 tanks for marine fuel, 3 tanks containing aviation fuel and 3 for Liquid Petroleum Gas.

The new bunkering terminal at Hambantota is expected to provide a major boost to the Sri Lankan bunker market. It will be designed to handle up to 500,000 metric tonnes of oil products a year, and, depending on demand, could also be further expanded to one million metric tonnes.