The Sri Lankan government revealed last week that it was considering a Chinese bid for the construction of a new oil refinery on the southern coast of the island.
A director of Sri Lanka’s state-run Board of Investment, Mangala Yapa, told Reuters on September 22 that Colombo was looking into a proposal submitted by two Chinese companies that want to form a joint venture for the project. He did not name the firms, but he did say that talks were already under way with the potential investors.
“The investment is large and we are discussing with the two companies on that basis,” he said.
The project attracted a total of three bids, Yapa added. One of the offers came from a US firm that teamed up with a local company, he said.
Colombo is looking to sign a contract for the building of a refinery capable of turning out 5 million tpy of refined fuels. It has not designated a construction site yet but says that the facility and its grounds will cover about 500 acres (2 square km). The cost of the project is likely to reach US$2.5-3 billion.
The oil-processing plant will be built in the southern Sri Lankan port of Hambantota, which is already under the management of another Chinese company. China Merchants Port Holding (CMPH) signed a 99-year lease for the port’s commercial operations in July.
The deal has aroused some controversy in Sri Lanka, where some observers have speculated that CMPH may allow Chinese naval vessels to dock in Hambantota. Officials in Colombo have responded to these concerns by revising the terms of the lease agreement to give the Sri Lankan Ports Authority more control over the site. This may not be enough to assuage critics, though, as CMPH is currently in negotiations with the Sri Lankan government on the development of an industrial zone adjacent to the port.