Sri Lanka’s biggest-ever FDI project a $3.7 billion oil refinery by Chinese giant Sinopec in Hambantota has hit a major roadblock due to disagreements over local fuel market access. While talks continue, the delay casts uncertainty over a deal touted to transform Sri Lanka’s economy and boost foreign reserves.
Sinopec’s $3.7 Billion Oil Refinery Project in Hambantota Faces Delays Over Market Access Dispute
Sri Lanka’s largest-ever Foreign Direct Investment (FDI), a $3.7 billion oil refinery project by China’s Sinopec, remains in limbo six months after it was signed under the National People’s Power (NPP) government. Despite its promise to revitalize the economy and boost the Hambantota region, the investment is stalled due to unresolved issues between the government and Sinopec regarding local market access.
The agreement was signed during President Anura Kumara Dissanayake’s state visit to Beijing earlier this year, marking a milestone in Sri Lanka-China economic ties. The deal involves the construction of a state-of-the-art oil refinery in Hambantota with a refining capacity of 200,000 barrels per day. While the bulk of the output is intended for export, Sinopec is pushing for full access to Sri Lanka’s local petroleum market something the government has restricted to a 20% share.
A senior official from the Ministry of Power and Energy, speaking on condition of anonymity, confirmed that negotiations are ongoing to resolve the market share dispute. He added that other aspects, such as land allocation and the regulatory framework, are minor and easily manageable.
Meanwhile, Professor Liu Zongyi, a senior fellow at the Shanghai Institutes for International Studies, noted that Sinopec has been encountering administrative and regulatory challenges in executing the project.
If successfully implemented, the refinery is expected to bring massive economic benefits to Sri Lanka, including enhanced foreign exchange earnings, local job creation, and infrastructure development in Hambantota. However, until the local market access issue is resolved, the country’s most ambitious FDI remains uncertain.
