- Sinopec seeks bigger stake, more concessions
- 500 hectares approved, but no lease signed
- CPC hints at new Sapugaskanda bid
- Cabinet report expected within weeks
- Negotiations at risk of collapse, fresh RFP on standby
The long-awaited $ 3.7 billion mega-scale oil refinery project in Hambantota, led by Chinese energy giant Sinopec, is facing further delays as an agreement on tax concessions between the Government and Sinopec is yet to be finalised.
Ministry of Energy Secretary Prof. Udayanga Hemapala, confirming the delay of the project, said: “The Government called for Requests for Proposal (RFPs) and only four were received. Ultimately, only Sinopec was retained and the rest were rejected.”
“Sinopec submitted its proposal under the Board of Investment (BOI) law, which limits foreign market equity to 20%. However, it is now asking for a greater stake and more tax concessions. We are currently in negotiations, but we have made it clear we cannot violate the original RFP,” he told The Sunday Morning.
While questions remained on the land lease agreement with Sinopec, Prof. Hemapala dismissed the notion as an impediment to the future of the project.
The requested land allocation of over 500 hectares has been agreed to in principle under the BOI framework, but no formal lease has been signed.
“It has requested more land and we have agreed to this in compliance with the BOI law. We cannot lease the land until everything is finalised. However, this is not a problem,” Prof. Hemapala stressed.
Environmental compliance also remains a critical barrier. Prof. Hemapala confirmed that the Environmental Impact Assessment (EIA) would only become a concern once the project received the green light to proceed.
However, the Central Environmental Authority (CEA), when contacted, could not provide details on the matter immediately.
“There is an RFP, which includes conditions in compliance with the BOI law. We have communicated this requirement to Sinopec and it is aware, but it is negotiating for more. In any case, we plan to submit a report to the Cabinet within two to three weeks,” he added.
Ceylon Petroleum Corporation (CPC) Managing Director Dr. Mayura Neththikumarage also acknowledged that discussions with Sinopec were ongoing, particularly concerning local supply chain integration.
“Sinopec wanted to fight for its part as a supply chain, but this is still under negotiation,” he said. “It submitted a revised proposal after a meeting last Friday and it is also exploring alternative solutions, including the possibility of engaging in other refinery projects.”
While Dr. Neththikumarage stopped short of making any claims, he suggested that it was possible that Sinopec was preparing a new Expression of Interest (EOI) for the Sapugaskanda refinery.
“While a proposal was finalised earlier based on the EOI, Sinopec is now seeking further commitments, particularly in terms of operational logistics and local partnerships,” he added.
He also clarified that the originally proposed investment amount of $ 3.7 billion remained unchanged: “There has been no indication from Sinopec about altering the investment figure. Perhaps if they introduce a new EOI, it may indicate something. Their focus is possibly on structuring local operations and developing a broader refinery strategy.”
Interestingly, the 500-hectare land allocation has not been a prominent issue in the latest rounds of negotiation, according to Dr. Neththikumarage.
If the negotiations are annulled owing to disagreements, Prof. Hemapala indicated that fresh agreements may be initiated based on a new RFP and the search for new investment partners.