Coin Press - Sri Lanka signs landmark $3.7 bn deal with Chinese state oil giant

Sinopec has agreed to invest $3.7 billion to construct a "state-of-the-art oil refinery" with a capacity of 200,000 barrels in the southern Hambantota region, according to the Sri Lanka president's media division.

"During President Anura Kumara Dissanayake’s four-day state visit to China, Sri Lanka marked a significant milestone by securing the largest foreign direct investment to date," it said.

A "substantial portion" of the refinery's output would be earmarked for export as part of efforts to shore up Sri Lanka's foreign exchange earnings, a statement said.

"This major investment from China is expected to bolster Sri Lanka's economic growth while uplifting the livelihoods of low-income communities in the Hambantota area," it added.

The port of Hambantota was handed to a Beijing company on a 99-year lease for $1.12 billion in 2017 after Sri Lanka was unable to repay a huge Chinese loan, a controversial decision which raised questions about Chinese investments in the country.

Sri Lanka also defaulted on its foreign borrowings in 2022 during a crisis that caused months of food, fuel and medicine shortages.

China accounted for more than half the country's bilateral debt at the time of the economic crash.

Leftist Dissanayake came to power in September and consolidated his position after his party won by a landslide in snap parliamentary polls last November.

His four-day visit to China comes after he was given a red-carpet welcome to India by President Narendra Modi during his first overseas trip as premier in December.

In a meeting with Dissanayake on Wednesday, Chinese President Xi Jinping said the two countries "face a historical opportunity to build on the past and forge ahead".

The two sides should see ties from "a strategic perspective and build a China-Sri Lanka community with a shared future", Xi said, according to state media.

Sri Lanka had originally awarded the refinery project in 2019 to an Indian family-owned company based in Singapore, but terminated the agreement after the firm failed to start construction.

Officials signalled in 2023 that they would award the contract to Sinopec after another bidder pulled out.

Sri Lanka sits astride the world's busiest shipping route, which links the Middle East and East Asia, giving its maritime assets strategic importance.

M.Mendoza--CPN