The Sri Lankan cabinet has granted approval for China’s energy giant, Sinopec, to establish a new petroleum refinery plant worth $4.5 billion at the strategically important Hambantota port in the island nation, announced Energy Minister Kanchana Wijesekara on Monday (27 November).
Sinopec’s upcoming plant, marking its entry into the Sri Lankan market in July this year, represents the largest foreign direct investment of $4.5 billion for Sri Lanka.
Wijesekara highlighted that the new refinery will include an associated products training centre, reports Economic Times.
Hambantota, the country’s second-largest port, has been managed as a joint venture between the Sri Lanka Port Authority and China Merchant Ports since 2017, known as the Hambantota International Port Group.
The port, operational since 2010, was financed through a commercial loan from the Exim Bank China.
This substantial Chinese investment in Sri Lanka follows the 99-year lease granted to state-run China Merchant Port Holdings at the Hambantota port in 2017, and another significant deal to construct a logistics and storage hub in the Colombo port.
This lease came about as Sri Lanka faced difficulties servicing a $1.4 billion loan taken for the port’s development.
Sri Lanka grappled with an unprecedented economic crisis last year, marked by a default on its $46 billion external debt.
Chinese loans used for several infrastructure projects between 2005 and 2015 were partially attributed to the crisis, as these projects were deemed financially unsustainable.
Notably, China holds a majority share of 52 per cent in Sri Lanka’s bilateral debt, and Beijing’s consent remains crucial for any efforts by Colombo to restructure its outstanding loans.
The decision to award the oil refinery project to a Chinese state-owned company underscores the continuing Chinese influence in Sri Lanka’s major infrastructure initiatives.