Sri Lanka’s Path to Becoming a South Asian Bunkering Hub: Opportunities, Challenges & the Road Ahead

A Disucsion with Kushan De Silva

Geographic Advantage and Strategic Position

Sri Lanka is strategically located along the busy East–West maritime corridor, one of the world’s most important shipping routes, with a steady flow of global trade passing its southern tip on a daily basis. This advantageous position has enabled the country to emerge as a key transhipment hub, led by the Port of Colombo, which handles over 7 million TEUs annually―well ahead of most South Asian counterparts. Unlike other large regional ports such as Chittagong in Bangladesh or Jawaharlal Nehru Port in India, Sri Lanka’s hub status makes it an attractive location for top-up bunkering, where vessels replenish fuel while in transit. Whilst major shipping lines rely on established hubs like Singapore or Fujairah for primary refuelling, Sri Lanka remains a preferred supplementary option due to its location and connectivity.

Despite this, the true potential of bunkering as a core maritime service has not been fully harnessed. Instead, Sri Lanka’s role has been constrained by limited refining and storage capabilities. Still, its accessibility, safety record, and proximity to heavily trafficked routes create windows of opportunity―especially in times of geopolitical instability, when alternative sea routes are sought after.

Economic Contribution, Job Creation, and Foreign Exchange

Sri Lanka’s maritime economy stands to gain significantly from the growth of the bunkering sector, which currently generates annual sales of approximately USD 700–800 million. With the right infrastructure development and improved access to competitively priced product markets, this figure has the potential to expand by three to five times. However, realising this growth trajectory requires addressing critical infrastructure constraints. At present, the country’s refinery capacity is insufficient to meet even domestic demand, necessitating costly imports from key supply hubs such as Singapore, the Middle East, and India.

Storage space at Colombo’s Jaya Container Terminal (Colombo Oil Bank) is capped at 35,000 metric tons, severely restricting the volume of marine fuel that can be handled. Expanding these storage and refining capabilities―perhaps through public-private partnerships and foreign direct investment―would be transformative, enabling better availability and competitive pricing while spurring ancillary marine businesses: ship repairs, logistics, catering, and supply chain services.

Job creation is anticipated as port infrastructure grows. With new terminals (such as the West and East container terminals) nearing operation, Colombo expects to surpass 5–6 million container units, boosting port movement and ecosystem opportunities.

Infrastructure and Logistical Upgrades

Tangible infrastructure improvements are necessary to keep pace with the industry’s ambition. This includes:

- Expansion of tank storage volumes for marine fuels

- Dedicated oil terminals capable of handling high-capacity discharge and rapid vessel turnover

- Upgrades to pumping speeds to minimize port waiting times

- Modernizing barges and introducing advanced metering solutions

Several international examples underscore the relevance of floating storage (FSOs) as a flexible, asset-light alternative where land scarcity impedes onshore expansion. Offshore bunkering allows rapid scaling without heavy capital expenditure, transforming geographical constraints into an advantage. Colombo must also resolve the current draft and berth limitations obstructing efficient bunker operations.

Regulatory Framework and International Compliance

Sri Lanka’s regulatory regime for bunkering is anchored in the Marine Pollution Prevention Act and Bunkering (Marine Environmental Protection) Regulations, which demand strict licensing, periodic inspections, and compliance with international standards. The national framework mirrors the International Maritime Organization (IMO) requirements, notably the IMO 2020 sulphur cap mandating marine fuels to contain under 0.5% sulphur. Only vessels equipped with appropriate scrubbers may use high-sulphur fuels.

Looking forward, 2050 IMO decarbonisation targets and proposed emission-related taxes suggest that Sri Lanka must update legislation, invest in renewables such as LNG, biofuels, and hydrogen, and establish certification protocols supporting sustainable fuel sourcing.

Competitive Pressures and Strategic Niches

The bunkering market is dominated by established heavyweights: Singapore, Fujairah, and now emerging Indian ports that benefit from cheap Russian oil and substantial spare refining capacity. Price competition is challenging; Sri Lanka cannot match these players until indigenous refining capabilities are upgraded. Until then, strategic positioning rests on:

- Targeting niche markets, bypassing major bunkering hubs

- Leveraging flexibility and rapid turnaround versus bureaucratic alternatives

- Focusing on vessel segments passing between the Indian subcontinent and South Africa, where bunkering options are sparse

Colombo, Hambantota, and Trincomalee must develop offerings for these niches while maintaining agility and competitive service levels.

Sustainability and Environmental Management

Environmental stewardship is central as Sri Lanka seeks to align bunkering practices with global emission reduction targets. Transitioning to alternative marine fuels―biofuels, LNG, methanol―is essential. Certification frameworks (such as ISCC for biofuels), accident prevention protocols, and disaster management readiness are required to avoid reputational harm from incidents like oil spills or contamination.

All marine service providers must adopt industry-best safety standards, develop contingency plans, and proactively mitigate risks, reinforcing Sri Lanka’s profile as a safe, responsible destination for bunkering.

Investment, Partnerships, and Scaling Capacity

Upgrading refineries and expanding storage require significant foreign direct investment: billions of dollars are needed for new buildouts, with local entities unable to shoulder the entire financial burden. Policy consistency and dependable operational frameworks are critical to attract global partners and oil majors. Public-private partnerships may ease these capital demands while ensuring swift, scalable development.

Embracing Technology: Digitalization and Smart Ports

The bunkering sector has been slow to adopt digital transformation. Embracing technology promises dramatic gains in efficiency and resilience. Real-time fuel monitoring, blockchain-based contracting, and smart port systems improve supply chain transparency, operational scheduling, and reduce risks of stockouts. Artificial intelligence can forecast demand, schedule deliveries, and optimize tank inventory, drastically cutting vessel waiting times and improving customer service.

Security and Risk Management

Sri Lanka enjoys a reputation for safety, free from the high piracy risks afflicting many African coastal regions[7]. Recent geopolitical events―such as disruptions in the Red Sea―have diverted vessel traffic to safer southern routes, boosting local bunkering demand[1]. Nevertheless, vigilance is needed to guard against threats such as oil contamination and smuggling.

Robust monitoring, quality assurance, and emergency response systems reinforce Sri Lanka’s status as a reliable, low-risk port for global shipping lines.

Milestones: The Road Ahead to 2030 and 2040

There are distinct policy actions that will signify Sri Lanka’s successful transformation into a leading South Asian bunkering hub by 2030–2040:

- Commissioning new refining capacity at Colombo or Hambantota

- Major expansion of fuel storage infrastructure

- Full readiness for alternative marine fuels ahead of 2028 IMO deadlines

- Streamlined policy frameworks supporting stable investment and efficient operations

- Integration of technology solutions to underpin smart, resilient port management

- Continued expansion of container and vessel throughput, matched by growth in bunkering volumes

India’s mega-port development plans and access to low-cost oil present competitive headwinds, but driven by strategic infrastructure, niche market focus, and sustainable modernization, Sri Lanka stands at the threshold of maritime leadership in the region.

Conclusion

Sri Lanka’s ambition to become South Asia’s primary bunkering hub will be realized if it leverages its strategic location, overcomes infrastructure bottlenecks, modernizes regulatory and technological frameworks, and focuses on sustainability and safety. The opportunity is real but demands deliberate, coordinated policy action―all underpinned by a spirit of adaptation and evolution in a rapidly changing global maritime industry.