Sri Lanka expects Chinese energy giant Sinopec to begin construction on a $3.7 billion oil refinery this year, while negotiations continue over the company’s request for expanded access to the domestic fuel market, Energy Minister Kumara Jayakody said on Tuesday.
The refinery, approved in 2023, will be located near the Hambantota port—a Chinese-built and operated facility in southern Sri Lanka—and will have the capacity to process 200,000 barrels of crude oil per day. “The land has already been allocated, and the other facilities are in place. The government shares the same expectation that the project will start this year,” Minister Jayakody stated.
Deputy Economic Development Minister Anil Jayantha Fernando noted that the refinery could take about three years to complete.
Fuel Market Access Under Negotiation
Sinopec has pressed for greater local fuel market access as a condition for project feasibility. While Sri Lanka initially planned for only 20% of refinery output to be sold domestically, officials are now considering raising the figure to 40%, according to Minister Jayakody and government sources.
“The point being negotiated is whether it should be 30%, 40%, or another figure,” said Arjuna Herath, Chairman of the Board of Investment of Sri Lanka. “There is strong commitment to work this out.”
A Sinopec spokesperson declined to comment.
Parallel Expansion of State-Run Refinery
In addition to the Sinopec project, Sri Lanka plans to invest $3 billion in expanding its state-owned refinery at Sapugaskanda, near Colombo, from its current 38,000 barrels per day capacity to 150,000 barrels per day.
The expansion, to be carried out by Ceylon Petroleum Corporation, is expected to begin next year and be completed within two to three years, Minister Jayakody said. Sinopec, along with companies from India, China, and Qatar, has expressed interest in the tender, which closes on September 26.
Geopolitical Significance
Sri Lanka’s strategic location along major maritime routes has heightened geopolitical competition between China and India, both investing heavily in infrastructure and energy to strengthen their presence in the Indian Ocean.
“Our country’s location is very important from a geopolitical standpoint,” Minister Jayakody emphasized. “Most sea routes pass nearby, giving Sri Lanka natural advantages in global trade and energy security.”
