In a move seen as retaliation of India backing a UN resolution against it, Sri Lanka has told New Delhi that it will renew Indian Oil Corp's contract to operate strategic oil tank farm only if a Lankan partner is included in the management.
Also, Sri Lanka has withdrawn an offer to give Oil and Natural Gas Corp (ONGC) two oil blocks in Mannar and Cauvery basin on nomination basis and has instead put them up for bidding in an auction round, sources with direct knowledge of the development said.
Lanka IOC (LIOC), a subsidiary of IOC, had in 2002 signed an MoU with state-owned Ceylon Petroleum Corp (CPC) to take the Trincomalee tankages on long term lease.
However, Colombo opposed the 35-year lease saying CPC had no authority to sign the agreement for the tank farm which was a state asset.
Sources said Sri Lanka's Secretary in Ministry of Finance and Planning in a meeting with Oil Secretary Vivek Rae firmly conveyed that lease could be finalised only if LIOC took a Lankan company, like CPC, as a joint venture partner.
IOC was asked to submit a comprehensive proposal on the structure of the proposed joint venture, they said.
At the meeting, New Delhi was also told to compete in an international tender for M1 and M3 blocks in Mannar and Cauvery basin, which were previously identified for giving on nomination basis.
On March 21, India had in the UN backed a US-sponsored resolution against Sri Lanka seeking an "independent and credible" probe into alleged human rights violation during the war against LTTE.
A day later, Lanka's Information Minister Keheliya Rambukwella was reported to have stated that there were provision to re-possess tanks not used by LIOC.
The China Bay tank farm, a World War II depot in Trincomalee, is the largest tank farm in South Asia and of great strategic value as it falls between the Middle East and Singapore.
