China’s Sinopec is to make an initial investment of US$1.5 billion, the single largest foreign direct investment (FDI), in building a refinery in Hambantota once the agreement is finalized within the next two weeks, a top source said.
It remained a foregone conclusion in political circles that the company would be awarded the project, though the government says it is open to any company participating in the competitive bidding process.
Previously, Colombo Port City, another Chinese investment, remained the largest FDI project in Sri Lanka. The source said Sinopec will make an investment of US$1.5 billion, but more money later in other related developments of the refinery.
Hambantota is a deep-sea port constructed during the time of former President Mahinda Rajapaksa with financial assistance from China. However, the port was leased to Chinese state-owned firm ‘China Merchants ‘in 2017 for 99 years for US$ 1.12 billion.
During the recent visit to China, President Ranil Wickremesinghe held talks with Sinopec Group Chairman Ma Yongsheng and top executives in Beijing last week. Sinopec has already entered Sri Lanka’s retail fuel market.
Sinopec secured the project since the only other contender to the project, Vitol Singapore, withdrew from the race.
Meanwhile, the operations of two other foreign fuel companies –the United States-based RM Parks and United Petroleum Australia—will be delayed. RM-Parks has deposited the performance bond, though.
“We have placed a condition that they cannot remit their profits from fuel trading technically for two years after the arrival of each shipment. Therefore, it becomes a huge initial investment for them. Therefore, they need time,” the source said.