Home » Govt. and Sinopec to sign deal on US$ 4.5 billion refinery by June: Minister

Govt. and Sinopec to sign deal on US$ 4.5 billion refinery by June: Minister


By: Staff Writer

April 22, Colombo (LNW): Sri Lanka is to sign an agreement with China Petroleum & Chemical Corporation (SINOPEC) to establish a new Petroleum Refinery in the island nation’s deep Southern Hambantota port, Power and Energy Minister Kanchana Wijesekera said.

“Cabinet approval was granted to award the contract to China Petroleum & Chemical Corporation (SINOPEC) of China, to enter into an agreement to establish a new Petroleum Refinery & Associated Product Processing center in Hambantota,” Wijesekera said in his X (formerly Twitter) platform.

The Minister said the government expects at least $4.5 billion investment in the new refinery which will cater into exports as well as local markets. Sinopec has already started fuel retailing in Sri Lanka, competing with Sri Lanka’s state-owned Ceylon Petroleum Corporation (Ceypetco) and Lanka IOC, a fully owned subsidiary of Indian Oil Corporation.

Though Sinopec and Vitol Asia based in Singapore were the two firms shortlisted out of seven companies that responded to an expression of interest early this year, Vitol withdrew its bid, government officials have said.

The move will strengthen China’s position in Sri Lanka where India and other developed countries are trying to win projects and have influence in the South Asian Island nation which is facing an unprecedented economic crisis.

Beijing already has a massive port in Hambantota on a 99-year lease and expects to establish an investment zone in 15,000 acre land

Power and Energy Minister Kanchana Wijesekera expressed optimism yesterday regarding potential developments with Sinopec, aiming for a comprehensive agreement aligned with the Government’s principles by next month, with a target to sign the agreement by June 2024.

He noted that concerns regarding the implications on land extent, logistics, port taxes, water resource management and compliance with Board of Investment (BoI) conditions emerged during deliberations with Sinopec having plans to increase capacities.

 “There were concerns raised on plans to increase capacities. We have provided our recommendations and made our decision. I anticipate that Sinopec will return in May 2024 to finalise the Memorandum of Understanding (MoU) once all parties agree on the outlined principles,” he told journalists.

On 27 November 2023, the Cabinet of Ministers approved awarding the contract to Sinopec to forge an agreement for the establishment of a petroleum refinery and associated product processing centre in Hambantota.

The proposed refinery project is expected to invest a minimum of $ 4.5 billion to be built in the Industrial Zone at the Hambantota Port.

Minister Wijesekera clarified that Sinopec would limit the sale of its volume to 10%, with no commitment from the Government to purchase any portion.

He also assured that the Government would adhere to the conditions outlined in the Expression of Interest (EoI) without deviation.

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