Chinese energy giant Sinopec is expected to conclude a feasibility study by June for a proposed plant in Sri Lanka’s Hambantota port, sources have told Reuters. The plant, which is estimated to cost $4.5 billion, is expected to be the Chinese energy giant’s largest foreign investment abroad and is also being seen as a challenge to neighbouring India who is looking to push a rival pipeline in the country. Local media reports state that India’s state-owned Indian Oil Corporation (IOC) has held talks with Sri Lanka’s Power and Energy Minister Kanchana Wijesekera in February regarding the oil pipeline.
Sri Lanka had approved the Sinopec proposal to build the refinery last year itself. The cabinet approval cleared the state-owned refiner to finalise project details and sign an agreement with the government before it starts building the export-oriented refinery at Hambantota in the south of the country. Following this, Energy Minister Kanchana Wijesekera had tweeted on X. “Cabinet approval was granted today to award the contract to China Petroleum & Chemical Corporation (SINOPEC) of China.”
The building of the refinery could hurt India’s energy dominance in Sri Lanka. Currently, the IOC is the number two fuel supplier to the country, after Sri Lankan government-owned Ceylon Petroleum Corp. Should the building of the Chinese refinery be finalised it will mean not just competition to India but a change in Sinopec’s strategy. According to the local online news portal lankaweb.com falling economic growth and the increased adoption of electric vehicles in China has meant Sinopec is now looking at the foreign energy market, and with its deep pockets, more projects may soon be in the pipeline According to the South China Morning Post, the company first set up its overseas entity in late 2023 called Sinopec Overseas Investment Holding. Though many details have not been shared by the company so far it has been understood that its overseas arm sees the Yasref refinery in Yanbu, Saudi Arabia, with Saudi Aramco and Hambantota as its two major projects.
The refinery is the latest bid between China and India to vie for influence in the island nation. India has pushed $4 billion in aid to Sri Lanka in 2022 which was seen as the country’s worst financial crisis in decades. New Delhi has also helped with solar projects and grid connectivity and should talks for the pipeline be finalised, will retain its energy dominance in the country. As analysts have pointed out, China is still a relatively late entrant into Colombo and so far investment has been restricted to building up infrastructure for the Hambantota port and highways in the country. However, the construction of the refinery does suggest that China is now willing to challenge India’s influence in Sri Lanka in the crucial energy sector.
(With inputs from Reuters)
