In order to expedite the construction of a proposed $3.7 billion oil refinery in its southern port city of Hambantota, Sri Lanka has struck a deal with Sinopec, the Chinese state energy giant.
According to Foreign Minister Vijitha Herath, Sinopec and Sri Lanka would work together to determine the proportion of refined fuel shipped from the plant. “This is one of the largest foreign investment projects Sri Lanka has received and we feel it will be important for us,” Herath stated. “We are dedicated to moving forward with this refinery, which has been discussed between the two nations for many years. We want to start construction as soon as feasible. He refused to elaborate on the refinery’s anticipated capacity.
Despite having a few smaller refineries, Sri Lanka is currently totally dependent on imported oil, which costs the financially constrained nation billions of dollars annually. In order to stabilize its economy after it collapsed due to a catastrophic foreign exchange crisis in 2022, the nation is seeking to attract foreign investment. After winning a $2.9 billion International Monetary Fund (IMF) program in 2023, Sri Lanka posted a faster-than-expected rally. This will have terrible immediate effects for an already deprived aid operation.
Sinopec and Sri Lanka will work to resolve land, tax and water issues within a month, Herath said, adding that Colombo expects the refinery to assist the Chinese-built Hambantota Port to function as a hub via bunkering services.
Last week, China and Sri Lanka signed 15 cooperation documents, including agreements on economic and technological development, when recently-elected Sri Lankan President Anura Kumara Dissanayake met China’s President Xi Jinping in Beijing. Dissanayake’s visit to debt-ridden Sri Lanka’s largest bilateral lender came after he first travelled to Beijing’s regional rival India. Specifics of the deals signed between Sri Lanka and China were not disclosed at the signing ceremony.
Sinopec’s effort to build a refinery in the Indian Ocean Island puts it in direct competition with India’s interests in expanding its role as an energy supplier to Sri Lanka. Herath said Sri Lanka is continuing discussions with India on a proposed fuel pipeline between the two countries and is open to refinery proposals from India.
