Negotiations on the proposed US$3.7 billion oil refinery at Hambantota International Port, to be developed by Chinese state-owned energy giant Sinopec, are in their final stages, with the Sri Lankan government expecting to conclude the agreement in the first quarter of 2026.
Despite earlier delays caused by disagreements over access to the domestic fuel market, the project has regained momentum and is now moving closer to the construction phase. A top-level Sinopec delegation is due to arrive in Sri Lanka in early February 2026to finalize operational and commercial arrangements.
Foreign Minister Vijitha Herath confirmed that discussions with his Chinese counterpart, Wang Yi, have paved the way for concluding the agreement within the next few months. Once finalised, the refinery will mark thelargest foreign direct investment (FDI) in Sri Lanka’s history.
The proposed state-of-the-art facility is designed to process 200,000 barrels of crude oil per day, significantly enhancing Sri Lanka’s refining capacity and reducing its reliance on imported refined petroleum products. The project is also expected to position Hambantota as a regional energy hub, leveraging its strategic location along major Indian Ocean shipping routes.
Negotiations in 2025 stalled primarily over Sinopec’s request for increased access to the local fuel market. While the project was initially intended to focus largely on exports, the government is now considering allowing up to 40% of production for domestic sales, compared to the originally proposed 20%, to improve commercial viability.
The refinery project was formally fast-tracked in January 2025, but byOctober 2025, Sinopec sought urgent government intervention to address bureaucratic hurdles and accelerate progress. By late 2025 and early 2026, both parties reached a consensus to move forward and “immediately launch” the project.
Designated a national priority, the refinery will be built on land already allocated near the Chinese-operated Hambantota Port, underscoring its strategic and economic importance. If finalised as planned, the project is expected to play a transformative role in Sri Lanka’s energy security and industrial development.
By Chitral Jayawarna
