China Joins Fray To Build Oil Refinery In Sri Lanka's Hambantota

China expressed interest to construct an oil refinery in Hambantota district of Sri Lanka.

This was in response to Sri Lanka's invitation for expressions of interest from builders to construct a refinery at Hambantota port, as per the government.

Officials from Sinopec, the Chinese state-owned oil company, met with Sri Lankan President Ranil Wickremesinghe on Monday (13 March) to discuss the refinery and oil distribution hub building in Hambantota.

Sri Lanka's president's office stated that Sinopec is ready to provide complete funding for the refinery's construction.

China constructed and leased Hambantota port for a 99-year term.

China aims to refine West Asian imported oil at the Hambantota refinery and transport it to their consumers through Myanmar or vessels, as per those monitoring their plans in the IOR.

The port was developed as part of China’s Belt and Road Initiative, but Colombo leased the port to Beijing in 2017 because it became unable to pay back the loan.

The Hambantota Port was funded largely by Chinese interest loans. According to official data from the Sri Lankan government, China is Sri Lanka’s largest provider of foreign debt. Struggling to repay what it owes, Colombo has leased the southern port to Chinese state-owned enterprises for 99 years.

In response to concerns about China using the Hambantota port for military purposes Sri Lankan President Ranil Wickremesinghe clarified that China would not be allowed to do so.

India is collaborating with Ceylon Petroleum Corporation to establish an oil tank farm in Trincomalee, a petroleum storage hub in eastern Sri Lanka. The joint venture is led by India Oil Corporation and aims to develop the only such facility in the country.

CMPorts, a Chinese state-owned port operator, holds a 99-year lease for operating in Hambantota. There are concerns that this lease may be used to establish a military base, which could challenge India's current role in the region.

Sinopec and CMPorts sent official teams to Sri Lanka this month for potential business opportunities, according to news sources.

Sinopec is China's second-largest oil and gas producer and the largest refining company globally, supplying oil and petrochemical products.

During the previous regime of Mahinda Rajapaksa in Sri Lanka, the government had borrowed $8 billion from Chinese banks to finance the development of Hambantota.

Although the country needs 110,000 barrels of oil products daily, it can only produce approximately 35,000 barrels per day at the Kelaniya refinery, resulting in the country's complete reliance on imported crude oil.