In a sweeping move to transform its energy infrastructure and reduce dependence on fuel imports, Sri Lanka has announced plans to invest $3 billion to expand its state-run refinery near Colombo, increasing its capacity from 38,000 barrels per day (bpd) to 150,000 bpd. The ambitious expansion has already drawn interest from major international players, including China’s Sinopec, as well as companies from India and Qatar, according to Energy Minister Kumara Jayakody.
This announcement comes alongside confirmation that Sinopec is expected to begin construction this year on a separate $3.7 billion refinery near the Hambantota Port, marking the largest foreign direct investment in Sri Lanka’s history.
Refinery Expansion Near Colombo: A Strategic Energy Upgrade
The state-run refinery near Colombo, operated by Ceylon Petroleum Corporation, is set to undergo a massive upgrade aimed at boosting domestic refining capacity and improving energy security. The current facility, which processes just 38,000 bpd, is insufficient to meet the country’s growing fuel demand. The planned expansion to 150,000 bpd will significantly reduce Sri Lanka’s reliance on imported refined products.
Minister Jayakody confirmed that Sinopec, along with firms from India and Qatar, participated in a recent tender briefing and have until September 26 to submit formal expressions of interest. The expansion work is expected to begin next year and be completed within two to three years, offering a critical boost to the nation’s energy resilience.
Sinopec’s $3.7 Billion Refinery: A Game-Changer in Hambantota
In parallel, Sinopec is preparing to break ground on a $3.7 billion refinery near the Chinese-built Hambantota Port in southern Sri Lanka. Approved in 2023, the refinery will have a processing capacity of 200,000 bpd, with a significant portion of its output earmarked for export.
The strategic location of Hambantota—just 10 nautical miles from one of the world’s busiest east–west shipping routes—gives the project a competitive edge in global energy logistics. The refinery is expected to enhance Sri Lanka’s foreign exchange earnings and diversify its economic portfolio.
Deputy Economic Development Minister Anil Jayantha Fernando stated that the project could take three years to complete, and land allocation and infrastructure preparations are already underway.
Fuel Market Access: Sinopec’s Local Ambitions
Sri Lanka is also considering allowing Sinopec to sell more fuel locally, a move that could help meet domestic demand and improve the feasibility of the Hambantota refinery. Previously, the government had proposed that only 20% of the refinery’s output be sold domestically, with the rest exported. However, officials are now weighing proposals to increase that share to 30–40%, depending on ongoing negotiations.
According to Arjuna Herath, Chair of the Board of Investment of Sri Lanka, Sinopec has expressed concerns about market access, noting that limited domestic sales could challenge the project’s viability. “There is a lot of commitment to see whether we can work this out,” Herath said.
Geopolitical Significance: A Tug-of-War in the Indian Ocean
Sri Lanka’s strategic location has made it a focal point in the geopolitical rivalry between China and India, both of which are investing heavily in infrastructure and energy projects on the island. India has also announced plans to establish an energy hub on Sri Lanka’s eastern coast, further intensifying competition for influence.
Minister Jayakody emphasized the importance of Sri Lanka’s position on global maritime routes:
“Our country’s location is very, very important for the geopolitical aspect, especially since most sea routes go nearby… our country naturally gains some important geopolitical advantages.”
Conclusion
With two major refinery projects on the horizon—one a $3 billion expansion and the other a $3.7 billion new build—Sri Lanka is poised to become a regional energy hub. The involvement of global players like Sinopec, and interest from India and Qatar, reflects growing confidence in the country’s economic trajectory and strategic importance.
As the tender deadline approaches and construction plans solidify, Sri Lanka’s energy future is being reshaped—barrel by barrel.
Sources: Reuters, Energy News, Daily FT
