NEW DELHI: Sinopec, a Chinese state-owned oil and gas enterprise, will be given the contract to build an oil refinery in the southern Sri Lankan port city of Hambantota, Sri Lanka’s Energy Minister Kanchana Wijesekera has said.
“There were only two bidders shortlisted and Vitol (Singapore) pulled out. That leaves only Sinopec and we will finalise an agreement with them in a couple of weeks,” Wijesekera told reporters in Colombo, as reported by PTI. The minister neither mentioned the amount of investment nor the refinery’s capacity.
The company is to make an initial investment of US $1.5 billion, the single largest foreign direct investment (FDI) in Sri Lanka, and put in more money later in other related developments of the refinery, a source told Daily Mirror.
In 2019, Sri Lanka awarded the project, with an estimated cost of $3.85 billion, to an Indian family-owned company based in Singapore. But after Silver Park International failed to start construction, the government terminated the agreement in August this year and took back 1,200 acres of land allocated for the project, according to PTI.
Earlier this year, Sinopec became the third player (after Ceylon Petroleum Corporation and LIOC, Indian Oil Corporation’s Sri Lanka arm) to enter Sri Lanka’s retail fuel market after signing a deal with the Sri Lankan government. As per the deal, the company’s 20-year licence would entitle it to run 150 fuel stations and open 50 new outlets.
Chinese projects have been subjects of intense scrutiny and public protests in Sri Lanka for being debt traps. The deep sea port at Hambantota built by a Chinese company is a case in point. It was ultimately given on a 99-year lease to a Chinese state-owned firm after Sri Lanka could not repay a loan of $1.4 billion.
Another white elephant is the Colombo Port City project, which is coming up on 269 hectares of land reclaimed from the Indian Ocean. The Chinese company developing it has already put in $1.4 billion.
More than a year after the island nation defaulted on foreign debt of $41 billion due to an unprecedented economic crisis, Sri Lanka said last month that it had reached a preliminary debt restructuring agreement with the Export-Import Bank of China, a key step for receiving the next tranche of funds from the International Monetary Fund.
China is Sri Lanka’s biggest bilateral creditor and the agreement with Exim Bank covers about $4.2 billion of the country’s debt.
Fingers crossed now, as another Chinese giant gets set to break ground in Hambantota.