Foreign Minister Vijitha Herath 

• Foreign Minister Vijitha Herath reveals recent agreement covers land, water supply, tax concessions and fuel allocation for exports and local market
• Says these critical factors were agreed to be finalised within a month 
• Opines project modelled on Singapore’s success to maximise foreign exchange benefits
• Explains $ 3.7 b investment breakdown, addressing $ 4.5 b claim by former Power and Energy Minister via ‘X’
• Assures Govt. worked to ensure deal is structured to maximise benefits for Sri Lanka
• Highlights Sinopec’s request for additional 200 acres of land for project, increasing total land requirement from 500 acres to 700 acres
• Expresses optimism about breaking ground on project as soon as possible

By Charumini de Silva

Foreign Minister Vijitha Herath yesterday clarified that the recently signed agreement with Chinese energy giant Sinopec was to expedite the long-delayed $ 3.7 billion oil refinery project at the Hambantota Port.

Addressing the media, he highlighted the significance of the deal, which gained renewed momentum during the recent visit to China led by President Anura Kumara Dissanayake, in boosting economic ties and securing foreign investment.

“This refinery has been under discussion for many years and during the recent visit, the Government committed to fast-track the initiative,” he added.

Originally, on 27 November 2023, the Cabinet of Ministers approved Sinopec’s oil refinery project, envisioned as a state-of-the-art facility with a refining capacity of 200,000 barrels per day.

Herath also clarified the composition of the $ 3.7 billion investment amid claims that the original investment was cited as $ 4 billion on a post made by former Power and Energy Minister Kanchana Wijesekera via ‘X’ (https://www.ft.lk/front-page/Cabinet-green-lights-4-b-Sinopec-deal-for-new-petroleum-refinery-in-Hambantota/44-755690).

“The total investment includes $ 1.78 billion in direct investment, $ 1.53 billion for construction costs (excluding VAT deduction), $ 68.1 million in construction-related interest, and $ 181.47 million allocated for working capital,” Herath disclosed.

He also said the new agreement signed covers critical aspects of the project, including land allocation, water supply, duty concessions, and the portion of refined fuel earmarked for the local market.

“It was agreed by both countries that these factors would be finalised within a month following the agreement’s signing,” he said, noting that Sinopec will determine the share of fuel to be used for bunkering, exports, to which countries, and how much of oil would be released to the local market.

The Minister underscored the potential economic benefits for Sri Lanka, drawing parallels to Singapore’s success in generating foreign exchange through similar investments in land and infrastructure.

“We have worked to ensure the deal is structured to maximise benefits for Sri Lanka,” he stressed.

Herath assured that Sri Lanka will benefit from leasing of land, export revenue, machinery and construction of the project.

A key development during recent negotiations in China, he said, was Sinopec’s request for an additional 200 acres of land, increasing the total land requirement from 500 acres to 700 acres.

“Nothing was agreed upon and it will be discussed during this month’s period on the above mentioned critical factors,” he stated.

Reiterating the Government’s commitment to fast-track the refinery’s development, he said: “We are optimistic about breaking ground as soon as possible.”