Sri Lanka to OK Sinopec's $4.5 bln refinery proposal on Monday -minister (updated)

China Merchants Port Holdings

25/11/2023 10:16

(Updates with details and background)
    By Uditha Jayasinghe and Chen Aizhu
       COLOMBO, Nov 25 (Reuters) - Sri Lanka will likely
approve on Monday a proposal from Chinese state refiner Sinopec
to build a $4.5-billion-dollar refinery, the South Asian island
nation's energy minister said 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 told Reuters.
    Sri Lanka, trying to recover from its worst economic crisis
in more than 70 years, is hungry for new investment and local
fuel supplies.
    Sinopec's investment of at least $4.5 billion "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 said.
    For Sinopec, the world's top refinery by capacity and one of
the largest petrochemical makers, the investment would mark a
breakthrough in a long effort to expand beyond China's borders.
It owns refinery assets in Saudi Arabia and petrochemicals
production in Russia.
    The Sri Lanka investment follows state-run China Merchant
Port Holdings' 99-year lease at Hambantota port and a $392
million deal to build a logistics and storage hub in Colombo
port, Chinese state media reported in April.
    That fits into Beijing's ambitious Belt and Road Initiative,
billed as recreating the ancient Silk Road to boost global trade
infrastructure, experts say.
    Sinopec will start basic engineering design, including
finalising the size of the refinery and technical configuration,
after getting official approval, a senior company official told
Reuters this month.
    The investment will add to Sinopec's recently started fuel
retailing business, the third international company with a
foothold in Sri Lanka, with a license to operates 150 petrol
stations.
    In August Sinopec and commodities trader Vitol were
shortlisted by the Sri Lankan government to bid for the
refinery. Vitol subsequently dropped out, the Sinopec official
said.
    The refinery may target markets beyond Sri Lanka, where
local fuel consumption is low, and use its partnership with
China Merchants Port to expand bunker fuel supply at Hambantota,
a deep-sea port near busy shipping lanes between Europe and
Asia, analysts say.
    Sinopec's fuel oil division, which runs the retail business
there, began in 2019 supplying marine bunker fuel at Hambantota,
another Sinopec official said.
    Sri Lanka's refinery at Sapugaskanda, commissioned in 1969,
can process 38,000 barrels of oil a day.

 (Reporting by Uditha Jayasinghe and Chen Aizhu; Writing by
Krishn Kaushik; Editing by William Mallard)
 ((Krishn.Kaushik@thomsonreuters.com; +91 8527322283;))