The Sri Lanka will likely approve on Monday a proposal by Chinese state-owned refiner Sinopec to construct an $4.5-billion-dollar refinery according to minister of the South Asian island nation’s energy minister told reporters on Saturday.
“It’s on the agenda for Monday. Once the cabinet gives approval, we will invite them to sign the agreement,” Power and Energy Minister Kanchana Wijesekera confirmed to Reuters.
Sri Lanka, trying to come back from the most severe economic downturn in over 70 years is in need of new investment as well as local fuel sources.
Sinopec’s investment, which is at least $4.5bn “will go up in value as and when they do additions, but they must first come and sign the agreement for us to give any more details,” Wijesekera declared.
For Sinopec, which is the largest and top refinery by capacity and one of the largest petrochemical producers, the acquisition would make a significant milestone in an ongoing attempt expanding beyond Chinese boundaries. Sinopec owns the refinery facilities in Saudi Arabia and petrochemicals production in Russia.
Its Sri Lanka investment follows state-run China Merchant Port Holdings’ 99-year lease at Hambantota port, as well as an agreement worth $392 million to construct an infrastructure for storage and logistics in Colombo port Chinese news media said in April.
This is in line with China’s ambitions for the Belt and Road Initiative (BRI) that claims to recreate the old Silk Road to boost global trade infrastructure, according to experts.
Sinopec will begin with the basic engineering design process, which includes determining the size of the refinery as well as the technical configuration after obtaining official approval, a top company official informed Reuters in the month of April.
The investment will enhance Sinopec’s newly begun fuel retailing business. the third multinational company to have an office in Sri Lanka, with an operating license for more than 150 fuel stations.
As of the month of August Sinopec as well as commodities trading company Vitol were selected by government officials from the Sri Lankan government to bid for the refinery. Vitol was then able to pull out in the process, a Sinopec official stated.
The refinery may focus on markets that are not Sri Lanka, where local fuel consumption is very low. It could also use its alliance together with China Merchants Port to expand the bunker fuel supply in Hambantota the deep-sea terminal near the busy shipping routes between Europe and Asia analysts suggest.
Sinopec’s Fuel Oil division that runs the retail operations in that region started in the year 2019 with the supply of marine bunker fuel in Hambantota another Sinopec official told.
Sri Lanka’s refinery located at Sapugaskanda which was inaugurated in 1969 can make 38,000 barrels oil per day.