Govt. discussing with two Chinese companies to set-up USD 3 billion refinery
Director of the BOI, Mangala Yapa says that two Chinese firms had presented a joint venture proposal to the Government of Sri Lanka (GoSL) to establish a refinery aimed at producing 5 million tonnes per year. The investment is estimated to cost USD 2.5 – 3 billion and will be set-up in the Hambantota Port, where China Merchant Port Holdings (CMPH) has a 99-year lease to handle commercial operations.
“The investment is large and we are discussing with the two companies on that basis. The joint venture plan was chosen from three bids including one from a U.S. company through a local partner. The refinery needs around 500 acres of land and we can’t reserve the land. Many people try to get the land first and then look for investors,” he said.
In order to mitigate fears from countries like Japan, the US and India, the GoSL amended its original agreement with CMPH to allow the Sri Lankan Ports Authority (SLPA) to have more influence.
The GoSL has an existing agreement with the Indian Oil Corporationwith the intention of focusing on fuel export for a-100,000 barrels per day-plus (bpd) refinery in the Trincomalee Port, making The Hambantota refinery the country’s second refinery.
Sri Lanka’s sole oil refinery, state-run Ceylon Petroleum Corporation’s decades-old 50,000 bpd plant, was originally configured to run on Iranian crude and Sri Lanka had to import more refined oil products after U.S. sanctions led it to stop imports from Iran.¹
Since the government has expressed interest in setting up a second refinery other interested foreign investors could also explore the opportunity. Establishing a second refinery in Sri Lanka will help with the country’s fuel issues. The government could then import more crude oil spending a lesser amount of dollars and refine the oil in Sri Lanka. It will help the country’s foreign reserves since the large amounts of monies spent on importing refined fuels would see a drastic decline. On the other hand, an increase in oil refining in the country could help industries that utilize refining by-products for various manufacturing work.
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