(CTN News) – The energy minister of Sri Lanka, Kanchana Wijesekera, has announced that the proposal from Chinese state refiner Sinopec to construct a refinery worth $4.5 billion is expected to be approved on Monday. The minister stated that once the cabinet approves the proposal, the agreement will be signed.
Sri Lanka is currently in dire need of new investments and local fuel supplies as it tries to recover from its worst economic crisis in over 70 years.
Wijesekera stated that Sinopec’s investment, which amounts to at least $4.5bn, has the potential to increase in value as they make additional contributions. However, in order for us to provide further details, they must first come and sign the agreement.
For Sinopec, the leading refinery globally in terms of capacity and one of the largest petrochemical manufacturers, this investment represents a significant milestone in their ongoing efforts to expand beyond China’s borders.
They already possess refinery assets in Saudi Arabia and engage in petrochemical production in Russia.
According to Chinese state media reports in April, the Sri Lanka investment comes after China Merchant Port Holdings, a state-run entity, secured a 99-year lease at Hambantota port, as well as a $392 million agreement to construct a logistics and storage hub at Colombo port.
Sinopec plans to invest in a new oil refinery in Sri Lanka, in line with Beijing’s Belt and Road Initiative. The company will begin basic engineering design once it receives official approval.
This investment will complement Sinopec’s fuel retailing business and make it the third international company to establish a presence in Sri Lanka. Sinopec was shortlisted alongside Vitol for the refinery project, but Vitol later withdrew from the bidding process.
According to analysts, the refinery has the potential to explore markets outside of Sri Lanka due to the low local fuel consumption.
By leveraging its partnership with China Merchants Port, it can expand the supply of bunker fuel at Hambantota, a deep-sea port strategically located between Europe and Asia.
Sinopec’s fuel oil division, responsible for the retail business, has already started supplying marine bunker fuel at Hambantota since 2019, as confirmed by another Sinopec official. Sri Lanka’s Sapugaskanda refinery, established in 1969, has a daily oil processing capacity of 38,000 barrels.