Laugfs Gas PLC today said that the Government has recognized the possible cost benefits to the country that can be derived by formation of a private public partnership (PPP) between the state owned Litro Gas Lanka Limited and Laugfs Terminal Limited.
In a filing to the Colombo Stock Exchange, in response to a query by the CSE and the company also indirectly confirmed a story published in a weekend newspaper regarding a proposed merger between the two gas companies.
The company said that in consideration of the existing excess storage capacity of the LPG terminal located at the Hambantota International Port, owned by Laugfs Terminals Limited, which is a subsidiary of Laugfs Gas PLC, the Government has recognized the possible cost benefits from the merger.
A main advantage is economies of scale of operations, by way of joint procurement of LP Gas through formation of a private public partnership between the state owned Litro Gas Lanka Limited and Laugfs Terminal Limited, it said.
The company also stated that discussions over the matter are at a very early stage and no firm proposal or indication of the modalities has been officially conveyed to them by the Government in writing.
Litro Gas Lanka Ltd has 8,000 metric tonne (MT) storage capacity at Muthurajawela gas terminal which is sufficient only for three to four days of market requirement, while the LAUGFS terminal at Hambantota port has a capacity of 30,000 MT with maneuverability up to 65,000 MT.
The LAUGFS Gas stores LP gas in the Hambantota terminal from where they export to countries such as Bangladesh, Myanmar, the Maldives, and India.
The new strategy has become essential for the long-term sustainability of the industry because of the operational losses made by the two entities due to price fixing by the government and on-going currency depreciation.
The restructuring of the industry has become necessary to avoid a gas price revision in the near future considering the increasing trend of fuel prices in the world market.
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