Colombo (LNW): Sri Lanka is poised to greenlight a US $4.5 billion refinery proposal from Chinese state-owned company Sinopec on Monday (27), Energy Minister Kanchana Wijesekera disclosed.
In the midst of its most severe economic crisis in over 70 years, Sri Lanka is actively seeking new investments and bolstering its domestic fuel sources.
The proposal is set to be discussed on Monday’s agenda, expressing optimism about receiving approval from the cabinet, a report by REUTERS revealed.
Once the approval is granted, the intention is to promptly invite Sinopec to formalise the agreement through signing.
Sinopec, renowned as the world’s leading refinery in terms of capacity and a major player in the petrochemical sector, views this investment as a significant milestone in its ongoing efforts to expand beyond the borders of China. The company already holds refinery assets in Saudi Arabia and engages in petrochemical production in Russia.
While the specifics of Sinopec’s investment remain under wraps until the agreement is signed, the Minister emphasised that the initial commitment is at least US $4.5 billion. Further details will be disclosed as the project progresses and additional components are incorporated, he added.
This development aligns with China’s expansive Belt and Road Initiative, a strategic endeavor aimed at revitalising the ancient Silk Road to enhance global trade infrastructure.
Previously, state-run China Merchant Port Holdings secured a 99-year lease for Hambantota port, and a US $392 million deal was inked for the construction of a logistics and storage hub in Colombo port, as reported by Chinese state media in April.
Upon official approval, Sinopec plans to commence the basic engineering design phase, which includes finalising the refinery’s size and technical configuration.
This investment will complement Sinopec’s recent foray into the fuel retailing business, making it the third international company with a foothold in Sri Lanka, holding a license to operate 150 petrol stations, the REUTERS report added.
Sinopec and commodities trader Vitol were shortlisted by the Sri Lankan government in August to bid for the refinery. However, Vitol withdrew from the competition, leaving Sinopec as the sole contender.
The refinery may extend its reach beyond Sri Lanka, considering the country’s relatively low local fuel consumption, Industry experts speculated.
The partnership with China Merchants Port could facilitate the expansion of bunker fuel supply at Hambantota, strategically positioned along busy shipping lanes between Europe and Asia.
Sinopec’s fuel oil division, which initiated its retail business in 2019, has been supplying marine bunker fuel at Hambantota, according to another Sinopec official. In contrast, Sri Lanka’s existing refinery at Sapugaskanda, operational since 1969, processes 38,000 barrels of oil per day.
