Sinopec Refinery Project: All Talk, No Action — Sri Lanka’s Biggest FDI Still Stuck in Neutral

Nearly nine months after signing a Memorandum of Understanding (MoU) for what was hailed as Sri Lanka’s largest single foreign direct investment (FDI) — a USD 3.7 billion oil refinery by China’s Sinopec — the project remains stalled with no tangible progress, sources revealed on October 10.

The massive project, proposed near the Hambantota Port — already operated under Chinese involvement — has hit repeated delays. The key reasons, according to insiders, are disagreements between the two sides over:

Tax exemptions, and

The percentage of refined fuel allowed for domestic sale versus export.

The original agreement, signed earlier this year during President Anura Kumara Dissanayake’s visit to China, allowed Sri Lanka to retain 20% of the refined fuel for local use and export the remaining 80%.

However, Sinopec later demanded that the local sale quota be raised to 40%, triggering a stalemate. The dispute over this revision — and on tax relief — has prevented the final agreement from moving forward.

While Sinopec officials have told foreign media they are waiting on the Sri Lankan government’s decision, Energy Minister Kumara Jayakody recently claimed the government still hopes to commence construction within this year.

The proposed refinery, with a daily capacity of 200,000 barrels, had received Cabinet approval in 2023 — but as things stand, the multibillion-dollar “game changer” remains a paper promise rather than a construction site.

Summary (NATO Mode: “No Action, Talk Only”):

MoU signed 9 months ago ✅

USD 3.7 billion promised ✅

Land and plans ready ✅

Construction started ❌

Consensus on tax/fuel sales ❌

Result: Sri Lanka’s biggest FDI dream — still simmering on low heat.