LNP – Australia’s United Petroleum faces challenges, eyes exit

• Halts import of fuel from December 2024, citing dissatisfaction with operational conditions, pricing formulas
•  Petroleum Shed Owners Association President Kumar Rajapaksa confirms supply disruption over price disputes
•  Says Govt. intervene to address issue, CPC step in to bridge supply gap 
•  Reveals of 150 filling stations allocated, only 64 dealers signed on
•  Employees suggest company might fully withdraw by next month

By Charumini de Silva

United Petroleum, the Australian energy giant that made a high profile-entry into Sri Lanka’s fuel retail market in August 2024, is on the brink of withdrawing from the country.

Citing dissatisfaction with operational conditions and the pricing formula, the company has halted its fuel supplies in December 2024 and is now engaged in negotiations with the Government.

The company’s decision to suspend operations marks a significant setback for what was United Petroleum’s first international retail venture outside Australia.

The firm announced its entry and operations with considerable fanfare, having secured a 20-year agreement under the Board of Investment (BOI) framework and committing $ 27.5 million to the import, storage and sale of petroleum products (https://www.ft.lk/business/United-Petroleum-inks-BOI-deal-to-start-operations-with—27-5-m-investment/34-762684). 

Petroleum Shed Owners Association President Kumar Rajapaksa confirmed the disruption, adding that United Petroleum stopped importing fuel from 19 December 2024 due to disputes over price reductions and mechanism.

“The Government has intervened in the negotiations and we remain optimistic about a resolution,” he told the Daily FT.

Rajapaksa also said the Ceylon Petroleum Corporation (CPC) has stepped in to bridge the supply gap, ensuring that the public does not face fuel shortages.

“Despite United Petroleum’s ambitious plans to operate 150 filling stations across the country at the initial stage, only 64 dealers signed on with many who did not, stating that the company was not reliable,” Association President said.

He commended the Government and CPC for its swift intervention and expressed hope for a favourable resolution.

Initial plans of the company also included expanding United Petroleum’s lubricant range and introducing its convenience store concept at gas stations, signalling a broader push to establish a strong foothold in Sri Lanka (https://www.ft.lk/front-page/Australia-s-United-Petroleum-goes-global-with-Sri-Lanka–eyes-expansion/44-765941).

Separately, employees of the company suggested that United Petroleum might close its operations entirely by next month. “The company is dissatisfied with the terms and procedures in place, which do not allow the operational freedom promised at the time of investment,” they told Daily FT based on anonymity.

The Australian energy giant’s entry into Sri Lanka was hailed as a landmark move to diversify the fuel retail market. 

On 27 March 2023, the Cabinet of Ministers approved a strategic move to open up the fuel retailing market further with the grant of a 20 year licence to three more global players from China, the US and Australia (https://www.ft.lk/top-story/More-to-make-fuelling-merrier/26-746791).

The move was intended to boost competition, ensure supply stability and attract much needed foreign direct investments (FDIs).