January 22, 2025 [Reuters]- Sri Lanka’s foreign minister said on Wednesday that the South Asian island nation had signed an agreement with Chinese state energy giant Sinopec to fast-track a proposed $3.7 billion oil refinery in its southern port city of Hambantota.

Sinopec and Sri Lanka will jointly decide the share of refined fuel that will be exported from the facility, Foreign Minister Vijitha Herath told reporters.

“This is one of the largest foreign investment projects Sri Lanka has received and we feel it will be important for us,” Herath said.

“This refinery has been discussed between the two countries for many years and we are committed to taking it forward. We hope to break ground as soon as possible.”

He declined to provide details on the planned capacity of the refinery.

A Sinopec representative in China did not respond immediately to a request for comment and its Sri Lanka office did not answer phone calls.

Sri Lanka is currently completely dependent on imported oil, which costs the cash-strapped country billions of dollars every year, though it does have some smaller refineries.

The country is looking to attract foreign investment to stabilise its economy which crumpled under a severe foreign exchange crisis in 2022. Sri Lanka posted a faster-than-expected rally after securing a $2.9 billion International Monetary Fund (IMF) programme in 2023.

Sinopec and Sri Lanka will work to resolve land, tax and water issues within a month, Herath said, adding that Colombo expects the refinery to assist the Chinese-built Hambantota Port to function as a hub via bunkering services.

Last week, China and Sri Lanka signed 15 cooperation documents, including agreements on economic and technological development, when recently-elected Sri Lankan President Anura Kumara Dissanayake met China’s President Xi Jinping in Beijing.

Dissanayake’s visit to debt-ridden Sri Lanka’s largest bilateral lender came after he first travelled to Beijing’s regional rival India. Specifics of the deals signed between Sri Lanka and China were not disclosed at the signing ceremony.

Sinopec’s effort to build a refinery in the Indian Ocean island puts it in direct competition with India’s interests in expanding its role as an energy supplier to Sri Lanka.

Herath said Sri Lanka is continuing discussions with India on a proposed fuel pipeline between the two countries and is open to refinery proposals from India.

Free Trial: Access 13,300 Tank Terminal and Production Facilities

13,300 tank storage and production facilities as per the date of this article. Click on the button and register to get instant access to actionable tank storage industry data