By: Staff Writer
December 09, Colombo (LNW): Sri Lanka’s long-awaited agreement with Chinese energy major Sinopec on a multibillion-dollar export-oriented oil refinery is moving toward a decisive phase, even as the country grapples with one of its worst natural disasters in recent history.
According to Board of Investment (BOI) Chairman Arjuna Herath, the Government has finalised its position and is now awaiting the Chinese company’s formal response expected within days before submitting the deal for Cabinet approval.
Speaking at the Sri Lanka Economic Summit organised by the Ceylon Chamber of Commerce, Herath stressed that the Sinopec refinery proposal stems from a tender issued well before the current administration, making adherence to original conditions non-negotiable.
The Government, he said, has engaged in multiple rounds of discussions since early 2024 to realign Sinopec’s updated proposal with the tender’s strict requirement for a fully export-oriented refinery.
In January 2025, Sinopec one of the world’s largest state-owned oil and gas conglomerates signed an agreement with Sri Lanka to expedite construction of a US$3.7 billion refinery complex in the industrial zone adjoining the Hambantota International Port (HIP).
If finalised, it would become the largest single FDI inflow in Sri Lanka’s history, surpassing all previous manufacturing-sector investments.
The January agreement also committed both sides to clearing bottlenecks that stalled the project in the past, including land demarcation, water supply infrastructure, environmental clearance, and tax clarifications.
Sinopec has reportedly requested limited access to Sri Lanka’s domestic petroleum market, arguing that global energy market shifts since 2019 have significantly altered project viability models. However, the Government maintains that the original tender was strictly for an export-driven operation, with no concessions for local market entry.
Herath emphasised that negotiations have now concluded and the “final offer” is already with Sinopec. Government officials expect confirmation before year-end, aligning with the administration’s goal of announcing major investment breakthroughs ahead of the 2026 budget cycle.
The refinery talks come at a politically sensitive moment. Sri Lanka is still reeling from the devastating cyclone and flooding that displaced hundreds of thousands, damaged critical agricultural output, and disrupted transport and energy infrastructure. Critics argue that the Government’s focus on a megaproject during a humanitarian crisis risks appearing misaligned with public priorities.
However, senior policymakers counter that securing long-term export-oriented projects is essential for rebuilding foreign reserves, widening non-traditional export earnings, and fulfilling IMF benchmarks in 2026–2027. China’s willingness to move forward despite the disaster-driven budget strain also signals Beijing’s continued strategic interest in Hambantota, a key node in its Belt and Road Initiative.
If concluded, the refinery could significantly reshape Sri Lanka’s industrial base while strengthening Sino-Sri Lankan economic ties. Herath remains confident: “We believe this project can be concluded before the end of the year.”
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