A record-breaking $3.7 billion investment deal between Sri Lanka and China’s Sinopec remains stalled, nine months after it was signed with much fanfare. The refinery project, expected to be built in Hambantota, was hailed as the largest foreign direct investment (FDI) in the nation’s history. However, the agreement has yet to move forward, raising concerns about the future of one of Sri Lanka’s most high-profile energy ventures.
The memorandum of understanding (MoU) was inked earlier this year during President Anura Kumara Dissanayake’s visit to Beijing. According to the deal, Sinopec would produce 100,000 barrels per day initially, with plans to double output to 200,000 barrels. Twenty percent of the output was allocated for Sri Lanka’s local market, while the rest was intended for export. But insiders reveal that the Chinese state-owned giant has since pushed for amendments, seeking a larger share of the local market and demanding a tax holiday.
Government sources insist that Colombo has refused to amend the tender terms. Officials stress that providing a tax holiday would contradict the country’s commitments under its ongoing International Monetary Fund (IMF) program, which limits such concessions to ensure fiscal stability.
The U.S. State Department, in its 2025 investment climate report, noted the government’s pledge to attract foreign investments and highlighted the importance of the Sinopec refinery project. Yet, the same report also pointed to recent setbacks, including Adani Green Energy’s withdrawal from a $400 million renewable energy project in northern Sri Lanka, after the government attempted to renegotiate an already awarded contract.
The stalemate underscores the difficulties Colombo faces in balancing its IMF obligations with its ambitions to attract large-scale investments. While the Sinopec deal remains on the table, the longer the deadlock continues, the greater the risk that the flagship project could be delayed indefinitely or even derailed.
For now, Hambantota’s billion-dollar refinery dream hangs in limbo, caught between investor demands and government constraints.
