• No investment from Sinopec yet as talks remain at impasse
• Energy Ministry, CPC deny involvement in negotiation delays
• Cabinet-appointed committee handling discussions with Sinopec

The highly-anticipated $ 3.7 billion oil refinery project in Hambantota, led by China’s Sinopec, faces an uncertain future as a deadlock over the proportion of refined products allowed for sale in the local market remains unresolved. 

The continuing impasse has stalled the project, with no investment introduced by Sinopec to date.

The original tender issued by the Government stipulated that only 20% of the refinery’s output could be sold in the local market.

The remaining 80% was expected to be exported, which would generate much-needed foreign exchange for Sri Lanka. This counter-offer means that the negotiations are currently at an impasse.

When contacted by The Sunday Morning, CPC Managing Director Dr. Mayura Neththikumarage noted that any deviation from the 20% local supply limit would necessitate a separate agreement or a formal amendment to the original tender terms.

“The issue lies in the negotiation. The 20% limit is a condition of the original tender. If they want to supply more locally, that would require a separate agreement or amendment to the terms. But this matter is between the investor and the Government, not the CPC,” he explained.

Ministry of Energy Secretary Prof. Udayanga Hemapala acknowledged the uncertainty, stating: “We don’t know how long it will take for the agreement to be finalised.”

The Government’s position is to ensure adherence to the existing tender terms unless formally amended. 

According to the CPC Managing Director, this stance is crucial for protecting the interests of State-owned entities like the CPC and safeguarding the nation’s energy security, which could be impacted by an unfettered market presence of a global giant.

When asked if the CPC had been denying local market access for the agreement to materialise, Prof. Hemapala rejected the notion. “No, it has nothing to do with the CPC. There is a separate Cabinet-appointed committee engaging with Sinopec. The progress of negotiations rests with them,” he said.

Both Dr. Neththikumarage and Prof. Hemapala confirmed that the project had not been finalised and therefore no investment had been introduced by Sinopec yet.

The Sinopec refinery project, estimated to be the single largest Foreign Direct Investment in Sri Lanka’s history, was initially formalised during a State visit by President Anura Kumara Dissanayake to Beijing in January.

The plan envisions a state-of-the-art facility with a processing capacity of 200,000 barrels per day, a substantial portion of which was intended for the lucrative export market, leveraging the refinery’s strategic location adjacent to the Chinese-managed Hambantota International Port.