* Severe drought curbs hydropower in Sri Lanka
* Stokes imports of diesel, fuel oil -sources
* Infrastructure push could also support demand for diesel
By Jessica Jaganathan and Shihar Aneez
SINGAPORE/COLOMBO, Feb 8 Sri Lanka's fuel
imports in January jumped to double typical monthly levels, with
the country rushing to plug an energy shortfall as severe
drought hits its hydropower output, industry sources said.
The South Asian nation is suffering its worst drought in
over 40 years, dragging hydro's share of Sri Lanka's power mix
to below 11 percent in 2016 from an annual average of about 35
percent, said Senthil Kumaran, senior oil analyst at energy
"As a result, fuel oil and diesel consumption in thermal
power plants increased, partly to offset the hydropower
deficit," Kumaran said.
"High fuel oil imports should continue amidst range-bound
Ceylon Petroleum Corp, the country's state-owned oil
importer, has been requesting bigger-than-usual volumes of
diesel and fuel oil in the spot market, traders said.
It has bought about 260,750 more barrels of diesel in
January than December and around 260,000 more barrels of fuel
oil, said a source close to the matter, speaking on condition of
Sri Lanka typically imports 26,000 to 32,000 barrels per day
(bpd) of diesel and 6,000 to 10,000 bpd of fuel oil, Kumaran
A delay in awarding term oil contracts also caused a spike
in spot imports, traders said.
"We have decided to increase imports of fuel oil mainly and
more diesel as well because the Ceylon Electricity Board needs
more for power generation," a senior Ceylon Petroleum official
said, declining to be named as he was not authorised to speak
with the media.
"(Ceylon Petroleum) is also going to maintain additional
stocks of fuel and diesel due to the drought. So both these
products will be maintained at more than required levels."
Sri Lanka's fuel oil demand will likely grow by about 14
percent year-on-year to 24,000 bpd in 2017 and diesel demand
will increase by 7 percent year-on-year to 53,000 bpd, FGE's
An improving housing market, lower interest rates and
government efforts to speed up infrastructure projects will keep
supporting diesel demand in the next two or three years, Kumaran
(Reporting by Jessica Jaganathan; Editing by Joseph Radford)