For nearly 80 years, the massive oil storage tanks at Trincomalee have stood as silent reminders of one of independent Sri Lanka's greatest unrealised strategic assets. Built by the British during the Second World War, the 99 surviving oil tanks overlooking one of the world's finest natural harbours were intended to fuel the Royal Navy's eastern fleet. After independence, however, they became less an economic asset than a geopolitical chess piece.

Today, after decades of diplomatic disputes, political suspicion and bureaucratic paralysis, the Trincomalee Oil Tank Farm is finally moving towards large-scale development. The transformation reflects not merely an energy project but a profound shift in regional geopolitics.

Earlier his week, the Cabinet Appointed Negotiation Committee (CANC) has approved the project for inviting bids for investors to develop 29 tanks out of 61 tanks in the possession of the Trincomalee Oil Tank Farm, Trinco Petroleum Terminal Ltd (TPTL).

A joint venture company, TPTL, was created in 2021. In it, the Ceylon Petroleum Corporation holds 51 per cent and Lanka IOC (a subsidiary of Indian Oil Corporation) holds 49 per cent. The agreement covers 61 tanks out of 99 for joint development. 

Tri-Nation Pipeline Agreement

When Indian Prime Minister Narendra Modi visited Sri Lanka last year, a tripartite agreement was signed among India, Sri Lanka and the United Arab Emirates (UAE) to develop a multipurpose pipeline connecting the two countries for two-way energy supplies.   

In the wake of the West Asian or Middle East crisis, Sri Lanka and India have recognised the need for the expeditious implementation of the Trincomalee petroleum hub project for energy security. The TPTL would announce a Request for Proposals (RFP) within a month for the development of these tanks.   

Trincomalee has been identified as a nodal point of cooperation between India and Sri Lanka in the field of energy security. The 1987 Indo–Sri Lankan Accord marked the first formal reference to Indian involvement in the development of the Trincomalee oil tank farm.   

Later, during the 2002–2004 period, India and Sri Lanka signed agreements allowing IOC involvement in fuel sales and distribution in Sri Lanka.

Ironically, India's security concerns were among the principal reasons why the tank farm remained underutilised for decades. During the Cold War, New Delhi viewed Trincomalee primarily through a strategic lens rather than an economic one. The harbour's immense military value raised fears that external powers, particularly the United States, could establish a strategic foothold only a few hundred kilometres from India's southern coastline.

When successive Sri Lankan governments explored proposals involving Western companies to modernise the oil storage complex during the 1980s, India objected strongly. New Delhi feared that commercial investment could become a gateway for permanent military access.

If one location matters most to India in Sri Lanka, it is Trincomalee. With one of the finest natural harbours in the world, Trincomalee has immense commercial, naval, and energy value. For decades, strategists in New Delhi have viewed it as critical to the security architecture of the Bay of Bengal. India made this strategy into a bilateral agreement when it was included in the Indo-Sri Lanka Agreement (ISLA) of 1987 signed  by President J R Jayewardene and Prime Minister Rajiv Gandhi. The ISLA explicitly stipulated that Trincomalee or any other Sri Lankan port should not be used in a manner prejudicial to India's security interests and that the restoration and operation of the oil tank farm should be undertaken jointly by Sri Lanka and India.

India’s long-term interest is to expand cooperation on the oil tank farm project, build an integrated energy hub, increase industrial and logistics presence and prevent rival powers from gaining strategic leverage in Trincomalee.

While the agreement addressed India's strategic anxieties, it did little to develop the tanks themselves. Political controversies over sovereignty, repeated changes of government, legal disputes over ownership, labour union resistance, and mutual distrust between Colombo and New Delhi prevented meaningful progress. 

Enormous Opportunity Cost

Successive administrations announced ambitious plans only to shelve them.

Meanwhile, the tanks deteriorated. Jungle vegetation swallowed much of the facility, while only a handful of tanks leased to Lanka IOC remained operational. Sri Lanka continued importing petroleum products despite possessing one of South Asia's largest fuel storage complexes.

The delay carried an enormous opportunity cost. Had the facility been modernised decades earlier, Trincomalee could have emerged as a regional petroleum storage and bunkering hub serving South Asia, Southeast Asia and the Indian Ocean shipping lanes. In the backdrop of Middle East crisis, this asset could have provided immense benefit to Sri Lankan economy.

The geopolitical environment that once prevented development has undergone a remarkable transformation. The United States and India, once strategic strangers during the Cold War, are now among the closest security partners in the Indo-Pacific.

Today, the US increasingly views India as the principal regional security provider in balancing China's growing influence. Consequently, New Delhi no longer sees American engagement in the Indian Ocean as an inherent security threat. Instead, both countries increasingly coordinate their regional strategies.

Altering of India's Calculations

This convergence has fundamentally altered India's calculations regarding Trincomalee. Rather than preventing development for fear of external influence, India now actively encourages infrastructure investment alongside trusted strategic partners. Sri Lanka, too, has recognised the commercial value of the project amid recurring energy crises.

The breakthrough came with the 2022 agreement establishing Trinco Petroleum Terminal Ltd., jointly owned by the Ceylon Petroleum Corporation and Lanka IOC to develop the Upper Tank Farm while preserving Sri Lankan ownership of key assets. Subsequent governments have reaffirmed their commitment to implementing the project, including the rehabilitation of 24 tanks in the initial phase.

More recently, discussions have expanded beyond bilateral cooperation to include broader regional energy partnerships, with Sri Lanka exploring Trincomalee as a long-term petroleum storage, refining and logistics hub involving India and other international partners.

Earlier this year, Indian Foreign Secretary Vikram Misri held a media briefing in Colombo during Indian Vice President C P Radhakrishnan’s visit and said that India wanted to immediately implement the Trincomalee energy hub proposal signed last year when Prime Minister Modi visited Sri Lanka. Misri said both sides agreed there was “no further time to lose” on strategic projects like Trincomalee.

Political reading of Indian Vice President’s visit was to reiterate that India is consolidating influence in Sri Lanka after the economic crisis and focus on Trincomalee, ports, energy, Tamil outreach, and people-to-people ties. It also reflects India’s effort to stay ahead of Chinese strategic inroads.

India is well aware that whoever has influence over Sri Lankan ports gains relevance in the Indian Ocean. Hence, India’s concerns are to ensure stable access to Colombo Port, which is vital for Indian transshipment trade,  deepen involvement in container terminals and logistics, strengthen maritime connectivity between southern India and Sri Lanka and reduce vulnerability to strategic surprises in nearby ports.

Potential of Trincomalee Development

The Trincomalee harbour possesses the ingredients necessary to become a comprehensive logistics and industrial hub integrating fuel storage, LNG facilities, renewable energy, port services, shipping, manufacturing and regional trade.

Combined with proposed power projects, industrial zones and enhanced maritime connectivity, Trincomalee could emerge as one of the most important economic centres in the Bay of Bengal.

If professionally negotiated the terms and conditions, Sri Lanka could gain many benefits like foreign investment without sovereign debt burden, jobs and industrial development in the East, better fuel security and lower logistics costs, revival of underused national assets 99 oil tanks and increased geopolitical relevance. However, Sri Lanka must ensure that national ownership, transparency and environmental safeguards are protected.

Whether Trincomalee ultimately fulfils its long-promised potential will depend not merely on engineering or investment but on Colombo's ability to maintain strategic balance while ensuring that economic development remains the primary objective.

After nearly 80 years of hesitation, the world's finest natural harbour may finally begin to realise the economic destiny that history long denied.

(The author, a former Sri Lankan diplomat, is a political and strategic affairs commentator. The views expressed are personal. He can be reached at sugeeswara@gmail.com.)