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Shell Gas Lanka Limited (SGLL) is considering reducing the current prices of LPG in response to a request made by Commerce and consumer Affairs Minister Ravi Karunanayake.

A communique issued by the company said that the request was made the minister at a meeting held with Commerce and Consumer Affairs Minister, last week, to look at a possible price reduction of domestic LPG cylinders. SGLL agreed to study the possibility of doing so.

Since the meeting, SGLL has requested suppliers to indicate the crude/LPG forecast for the year 2002, whilst taking into account the expected fluctuations of the Sri Lankan rupee against the US dollar. International LPG Prices (Saudi Aramco Contract Price) have increased by US$ 17 per metric ton in January 2002 which amounts to an increase of approximately Rs. 20 in the cost of gas for a 12.5 kg domestic cylinder. Therefore, despite certain media reports, it is too early to give a commitment. However, we aim to provide a response to the Minister as soon as possible, the media release said.

Since SGLL has to import 100% of its LPG-requirement, this means that the company has to pay for its LPG at international prices in US dollars. In addition, Shell has to pay shipping cost in US dollars, custom duties, surcharges, additional insurance premiums for War Risk cover for LPG ships and taxes etc. All this makes imported gas relatively costly compared to locally produced LPG from the CPC refinery.

Unfortunately, the CPC refinery cannot produce more than 10% of the local LPG requirement and we are compelled to import and provide LPG storage capacity to guarantee daily supplies to our customers, the release pointed out. As for 2002, Shell intends to propose a similar pricing approach as adopted by CPC recently, i.e. a monthly price setting based on international LPG prices (Saudi Aramco Contract Price) and value of the rupee against the US dollar.

This would mean that the price of gas could potentially change every month upwards or downwards Such a mechanism provides the customer with a transparent price which passes the benefit of price reductions directly to the customer, the release added.

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