Work began March 24 on a $3.9 billion oil refinery to be funded by a Singapore-Oman joint venture next to a Chinese-run port in what will be Sri Lanka’s largest foreign investment ever.
The refinery and a tank farm will be built on 237 hectares (585 acres) of land lying about 235 kilometers (146 miles) south of Colombo, Sri Lanka’s capital, near the Hambantota port that is controlled by a Chinese firm. The refinery is expected to be up and running in 2023.
The refinery will produce 200,000 barrels per day, mainly for export, though Sri Lankan companies could place orders for refined products and sell them to local consumers.
Nalin Bandara, Sri Lanka’s deputy minister of international trade, said last week that the refinery will be a joint venture between Singapore-based Silver Park International Private Ltd. and the Sultanate of Oman’s Ministry of Oil and Gas. He said Silver Park has a 70 percent stake in the joint venture, while Oman controls 30 percent.
Oman’s oil and gas minister, Mohammed bin Hamad Al Rumhi, together with the top officials from Silver Park attended a launching ceremony, which was broadcast live on state television.
“We feel obliged and honored to be invited to take part in the development of Sri Lanka,” Rumhi said.
Sri Lankan officials say the project is the biggest foreign investment in the country’s history.
The investment comes as Sri Lanka struggles to repay $5.9 billion in foreign loans this year, of which 40 percent must be serviced by the end of this month. The country used its reserves to repay a $1 billion sovereign bond loan in January.
Much of Sri Lanka’s foreign debt is from China, with loans obtained to build highways and other infrastructure projects, including some that have become white elephants, deepening the country’s debt burden.
Sri Lanka leased the $1.4 billion Chinese-built Hambantota port, located near the world’s busiest east-west shipping route, to a Chinese firm in 2017 for 99 years in a bid to recover from the heavy burden of repaying a loan received to build the facility.
The port is part of Beijing’s so-called string-of-pearls plan for a line of ports stretching from Chinese waters to the Persian Gulf.
China’s influence in Sri Lanka makes neighboring India anxious because it considers the Indian Ocean region to be its strategic backyard. Sri Lanka’s government has been trying to balance both Asian giants. Sri Lankan officials have reiterated that the port’s security will be handled by the government in an attempt to allay fears that the port could be used by China as a military hub.
Sri Lanka expects a $7 billion rise in its foreign earnings once the refinery begins production.