- Outcome could decide Sinopec’s investment move
The Sinopec oil refinery project, which marks the largest-ever Foreign Direct Investment (FDI) in Sri Lanka’s history, is finally in its last stages, with the final agreements between the Chinese State-owned energy giant and the Board of Investment (BOI) now being finalised.
Once these agreements are signed, construction on the multibillion-dollar oil refinery in Hambantota is expected to begin.
Accordingly, the final agreement between China Petroleum and Chemical Corporation (Sinopec) and the BOI will be signed shortly, paving the way for the commencement of construction of the $ 3.7 billion refinery project, which has faced several years of delay due to procedural and logistical challenges.
Ceylon Petroleum Corporation (CPC) Managing Director Dr. Mayura Neththikumarage told The Sunday Morning that discussions between the parties had reached the final stages.
“The agreements are currently being finalised and the final agreement will soon be reached,” Dr. Neththikumarage confirmed.
Sinopec, one of the world’s largest oil and gas conglomerates, signed an initial agreement with the Sri Lankan Government in January to accelerate the development of the Hambantota refinery located near the Hambantota International Port.
The project, valued at $ 3.7 billion, is considered a landmark investment, addressing earlier issues related to water access, land allocation, and taxation – all of which have now been resolved.
The refinery will have a processing capacity of 200,000 barrels of crude oil per day, and a significant share of its output will be allocated for export.
However, the Sri Lankan authorities are currently evaluating the possibility of increasing Sinopec’s local sales quota from the present 20% to as much as 40%, which could enhance domestic fuel supply stability while allowing the company to expand its role in the local market.
Meanwhile, in parallel to the Hambantota project, the evaluation of the Requests for Proposals (RFPs) submitted by interested parties, including Sinopec, for the refurbishment and expansion of Sri Lanka’s existing Sapugaskanda Oil Refining Complex has reached its final stages.
According to the CPC Managing Director, the second round of screening has now been completed, and the results are expected within the next month.
“We have now completed the second screening and are waiting for the results. The first evaluations are already completed. The results of the evaluation will be out in another month’s time,” Dr. Neththikumarage said.
Earlier, it was reported that the CPC had received 20 Expressions of Interest (EOIs) for the Sapugaskanda development, which were evaluated last week, and that the results of this process would play a decisive role in determining Sinopec’s course of action in Sri Lanka.
The results of the EOI evaluation could have a significant impact on Sinopec’s final decision regarding whether to proceed with the Hambantota refinery investment, as the Government has yet to respond to Sinopec’s request to increase its domestic market share from 20% to 40%, it is reliably learnt.
The outcome of the Sapugaskanda project evaluation, therefore, is being closely watched by all parties involved, given its implications for the future of Sri Lanka’s petroleum sector and the long-awaited Chinese investment.
Sri Lanka’s petroleum sector is currently dominated by two key players – the State-owned CPC and Lanka IOC (LIOC), a subsidiary of Indian Oil Corporation Ltd.
The CPC operates the country’s only existing refinery at Sapugaskanda, which has a capacity of 50,000 barrels per day, and controls most of the nation’s fuel distribution network. In the first half of 2025, the CPC reported a profit of Rs. 18 billion, reflecting stronger performance following several years of financial challenges.
LIOC, meanwhile, holds an estimated 18-20% share of the retail fuel market and operates over 260 fuel stations nationwide. The company also commands around 15.8% of the domestic lubricants market and 35% of the marine fuel supply market.