Sri Lanka is poised to grant approval on Monday for a $4.5 billion refinery project proposed by Chinese state refiner Sinopec, according to statements from the South Asian nation’s Energy Minister, Kanchana Wijesekera.
“It’s on the agenda for Monday. Once the cabinet gives approval, we will invite them to sign the agreement,” said Minister Wijesekera in comments to Reuters.
Facing its most severe economic crisis in over 70 years, Sri Lanka is actively seeking new investments and local fuel supplies to aid its recovery.
Sinopec, the world’s leading refinery by capacity and a major petrochemical producer, is looking to make a significant foray beyond China’s borders with this investment. The $4.5 billion investment is expected to increase in value as additional elements are incorporated, with the agreement signing being the initial step.
For Sinopec, this investment represents a breakthrough in its prolonged efforts to expand internationally. The company already holds refinery assets in Saudi Arabia and engages in petrochemicals production in Russia.
This move aligns with China’s broader Belt and Road Initiative, a global infrastructure development project aimed at enhancing trade connectivity along ancient Silk Road routes.
Following the 99-year lease of Hambantota port by China Merchant Port Holdings and a $392 million deal to establish a logistics and storage hub in Colombo port, this investment reinforces China’s economic ties with Sri Lanka.
Sinopec, once official approval is secured, will initiate the basic engineering design phase, determining the refinery’s size and technical configuration. The investment complements Sinopec’s ongoing fuel retailing business in Sri Lanka, where it holds a license for 150 petrol stations, making it the third international company in the country.
Analysts suggest that the refinery, situated at Hambantota near busy shipping lanes between Europe and Asia, may extend its market reach beyond Sri Lanka. The partnership with China Merchant Port could facilitate the expansion of bunker fuel supply at Hambantota, enhancing the strategic significance of this deep-sea port.
In August, Sinopec and commodities trader Vitol were shortlisted by the Sri Lankan government for the refinery bid, but Vitol subsequently withdrew from the competition.
Sri Lanka’s existing refinery at Sapugaskanda, commissioned in 1969, currently processes 38,000 barrels of oil per day. Source: Reuters
