• Up to 40% local sales via tender
• CPC controls 50% market share, no plans to reduce capacity
• Govt. to purchase crude oil from US for Sapugaskanda Refinery

The State-run Ceylon Petroleum Corporation (CPC) yesterday (20) clarified that it had no guaranteed obligation to purchase refined products from Chinese energy giant Sinopec, which is set to construct a $ 3.7 billion refinery in Hambantota.

CPC Managing Director Dr. Mayura Neththikumarage told The Sunday Morning that the Government was considering allowing Sinopec to sell up to 40% of its production domestically.

“However, this is not part of any formal agreement with the CPC or other market participants. The conditions and framework for this arrangement are still under discussion. Participation will be based on standard tender processes and buyers will have the freedom to purchase depending on pricing. 

“Essentially, if the price is competitive, anyone can buy up to 40% of the total production, but there is no guaranteed commitment from the CPC or any other party,” Dr. Neththikumarage said.

When asked about potential plans to reduce the CPC’s capacity, he said: “At this stage, there are no plans to reduce the CPC’s capacity. Therefore, market shares for Sinopec, CPC, Lanka IOC (LIOC), and other existing players in the market will remain largely unchanged.”

Sinopec, China’s State-owned oil and gas conglomerate, signed an agreement with the Sri Lankan Government in January to fast-track the construction of a $ 3.7 billion refinery near the Hambantota International Port. 

Headquartered in Beijing, Sinopec is the world’s largest oil refiner by capacity and a leading global petroleum and petrochemical company. In 2023, it produced 70.92 million MT of oil and gas equivalent, processed 258 million tonnes of crude oil, and reported a net income of 60.5 billion yuan (approximately $ 8.37 billion). 

The Hambantota refinery will have a processing capacity of 200,000 barrels per day, with a significant portion of output designated for export.

Commenting on the possible impact of Sinopec’s local sales on Sri Lanka’s crude oil purchases from the US and output at the Sapugaskanda Refinery, Dr. Neththikumarage clarified: “Products from Sinopec are refined products, not crude. Sinopec’s crude purchases are independent, and the crude oil we purchase from the US will be used solely for Sapugaskanda Refinery operations.”

Sri Lanka’s petroleum sector is primarily dominated by two key players: the CPC and the privately operated LIOC, a subsidiary of Indian Oil Corporation Ltd. 

The CPC holds over 50% of the market share, operating the country’s only refinery at Sapugaskanda with a capacity of 50,000 barrels per day, and controls most fuel distribution infrastructure. In the first half of 2025, the CPC reported a profit of Rs. 18 billion. 

LIOC holds roughly 18–20% of the retail fuel market, operating over 260 fuel stations nationwide and commanding around 15.8% of the domestic lubricants market and 35% of the marine fuel supply market.

Several foreign companies have also entered the Sri Lankan petroleum market to diversify the sector. United Petroleum, an Australian company, initially operated in the country but closed its 64 stations in December 2024, which were subsequently taken over by the CPC. 

Meanwhile, US-based RM Parks has partnered with Shell Brands International to launch Shell-branded fuel outlets in Sri Lanka.

Sinopec’s Hambantota refinery is expected to be completed within three years, with authorities considering increasing its local sales quota from 20% to potentially 40% of refinery output.

Energy Ministry Secretary Prof. Udayanga Hemapala was not available for further comment on the ongoing negotiations with Sinopec on the proposed Hambantota refinery.