263 billion! sinopec adds another ten-million-ton refinery

Sri Lanka's Minister of Energy officially announced on Tuesday that Sinopec is expected to start its refinery construction project in Sri Lanka.

The total investment of the project reaches 3.7 billion USD, approximately 26.3 billion RMB, and it is a large-scale energy investment project that has attracted significant attention in the local area.

The construction permit for this refinery was approved as early as 2023, with a capacity to process 200,000 barrels of crude oil per day, equivalent to an annual refining capacity of approximately 10 million tons.

This also means that Sinopec will add another million-ton level refining facility, further expanding its energy layout in overseas markets.

In early 2025, Sri Lanka signed relevant agreements with China Petroleum & Chemical Corporation.

According to the agreement, Sinopec will expedite the construction of this refinery with an investment scale of $3.7 billion.

The project is located near Hambantota Port in the southern port city of Hambantota, Sri Lanka. According to the plan, the overall construction period is three years.

As one of the largest foreign investment projects in Sri Lanka in recent years, this project not only influences the economic cooperation between the two countries but also deeply embeds into the energy and geopolitical competition landscape of the Indian Ocean region.

From the perspective of location, Hambantota Port, as a comprehensive artificial deep-water port, is situated at a key point on the maritime routes between Asia, Europe, and Africa. A large number of international merchant ships pass through and dock here, providing natural convenience for the future operation of the refinery.

Sri Lanka hopes to leverage the new refinery to provide refueling services for passing ships and develop Hambantota Port into a regional maritime energy supply hub.

As a result, Sri Lanka has become the focus of a geopolitical game among multiple countries. Nations such as China and India have invested heavily in its energy development and infrastructure construction sectors, attempting to expand their influence over this island nation of 22 million people through project cooperation.

The Hambantota Refinery Project is a significant move in the regional competition.

In 2019, Sri Lanka had awarded the project to an Indian family enterprise, but the latter never commenced construction, eventually leading to the termination of the cooperation agreement.

India's energy plans in Sri Lanka have not stalled. Earlier this year, India announced its intention to establish an energy hub on the eastern coast of Sri Lanka and proposed a fuel pipeline project to meet its energy needs.

Currently, the state-owned Indian Oil Corporation has become the second-largest fuel supplier in Sri Lanka, second only to the state-owned Ceylon Petroleum Corporation.

To expedite the project's implementation, the Sri Lankan Foreign Minister explicitly stated that key issues related to land allocation, tax incentives, and water supply assurance will be resolved within a month to pave the way for the groundbreaking of the project.

However, up to now, both parties still have disagreements regarding the proportion of domestic sales and exports of the refinery's output.

The Sri Lankan government initially hoped that Sinopec would sell only 20% of its production locally, with the remainder for export. It is now considering increasing the local sales proportion to 40%.

The cooperation with Sri Lanka in oil refining is based on Sinopec's consideration of multiple factors.

These factors include the environmental changes within the petrochemical industry itself, the development trends of the domestic market in China, the development needs of Sri Lanka's refining industry, and the potential contained within this industry.

Therefore, this collaboration involves strategic considerations and contains market opportunities. For both parties, it is a mutually beneficial two-way choice.

In recent years, from the perspective of domestic development, with the continued advancement of energy transformation in China, the new energy vehicle industry has experienced explosive growth, with sales surging year after year. This trend has directly and significantly impacted the consumption of traditional refined oil products in the country.

Data shows that in 2024, the consumption of gasoline and diesel in China has clearly shown a declining trend, and the growth space for the refined oil market is gradually narrowing.

In this context, if domestic refining enterprises continue to focus solely on refining and sales within the domestic market, it is foreseeable that they will face market competition pressures and survival challenges in the future.

Therefore, seeking new development opportunities externally becomes an inevitable choice for refining companies.

In this industry context, the Hambantota Refinery Project in Sri Lanka has become an important move in Sinopec's "going global" strategy, marking a significant milestone in its global expansion strategy.

In contrast to the "saturation pressure" faced by the Chinese refining market, Sri Lanka is at a critical stage in the development of its refining industry, with an urgent need to enhance its refining capacity.

Currently, all domestic refining capacity in Sri Lanka is controlled by the state-owned Ceylon Petroleum Corporation, which operates the Sapugaskanda Refinery, the only refinery facility in operation.

The old plant, which began operations in 1969, was initially designed with a capacity to process only 38,000 barrels of Iranian light crude oil per day. Its capacity has long been insufficient to meet the country's growing energy demands.

In 2022, Sri Lanka fell into a severe economic crisis due to the dual impact of the pandemic and the sharp rise in international energy prices, which led to social unrest and exposed the vulnerability of its energy supply.

This not only increases the financial burden on the country but also makes its energy security highly susceptible to fluctuations in the international market.

To fundamentally change this passive situation and enhance domestic refining capabilities, Sri Lanka is currently making every effort to advance two major key refining projects.

One project is the Hambantota Refinery project led by Sinopec; the other is the expansion of the existing Sapugaskanda Refinery.

After the expansion of the Sapugaskanda Refinery, its capacity will significantly increase from 38,000 barrels per day to 150,000 barrels per day. Currently, energy companies such as Sinopec from China, as well as from India, Qatar, and other countries, have expressed interest in participating.

The completion of these two major refining projects is of great significance to Sri Lanka.

On one hand, it will significantly alleviate its high dependence on imported refined oil, notably enhancing the country's ability to respond to international energy market price fluctuations and ensure energy security.

On the other hand, the construction and operation of large refineries will create numerous direct and indirect job opportunities, drive the development of the upstream and downstream petrochemical industry chain, and inject strong momentum into the local economy.

For Sinopec, the value of participating in the Sri Lanka refinery project is equally significant.

This not only provides an effective path for enterprises to avoid competition pressure in the local market, but more importantly, it allows Sinopec to deeply engage in the South Asian energy market. This lays a solid foundation for further expanding its global petrochemical business and enhancing its competitiveness in the international market.