Sri Lanka and China have reached an agreement on tax concessions for a proposed $3.7 billion oil refinery in Hambantota, marking a milestone in the long-delayed investment by Chinese energy giant Sinopec.
Minister of Labour and Deputy Minister of Economic Development, Anil Jayantha Fernando said that tax terms were finalised, with only one key issue pending, the volume of fuel that can be released to the domestic market.
Minister Fernando told The Sunday Observer that the Sinopec project, which has doubled in scope since its initial announcement, could be a game changer for Sri Lanka’s energy sector.
“Sri Lanka has been in discussions with China about this refinery for some time. Initially, it was planned as a $1.9 billion investment with a 100,000-barrel-per-day capacity. Tax concessions were agreed upon under the Strategic Development Projects Act (SDP Act) No. 14 of 2008, and Sri Lanka agreed to permit 20 percent of the output to be sold domestically. However, that plan stalled,” he said. The investment has been revised to $3.7 billion, and the capacity doubled under the NPP Government.
“Our daily fuel consumption is around 120,000 barrels. Sinopec has asked for permission to release 80,000 barrels per day into the local market, but we believe that is not viable from either a commercial or sustainability perspective,” Fernando said. “That’s the only remaining point of negotiation. Everything else has been agreed upon.”
The minister expressed confidence that a final agreement would be reached soon.
