A Strategic Shift
Chinese energy giant Sinopec is pushing for a greater presence in Sri Lanka's market, aiming to build its first fully-controlled overseas refinery. This move reflects a shift in the company's global strategy to compensate for slowing demand growth at home.
Sinopec's effort to build a refinery with a more domestic orientation puts it in direct competition with India, which is also seeking to expand its role as an energy supplier to Sri Lanka.
Sinopec is prioritizing the Sri Lanka investment and another in Saudi Arabia under a newly launched investment arm. This effort aims to leverage its expertise and deep pockets to expand globally as oil demand nears its peak in China.
Sri Lanka's Energy Needs and China's Influence
Sri Lanka's government is seeking a refinery that would deliver 20% of its fuel domestically and export the rest. However, Sinopec believes domestic sales would be more profitable.
The company is considering either a 160,000 barrel per day (bpd) plant or two 100,000-bpd plants built in phases, which in either case would be geared towards gasoline and diesel fuel.
India's Counter-Move and Growing Influence
India is also vying for influence in Sri Lanka's energy sector, proposing various energy "connectivity" projects and deepening its involvement in the power sector.
China is a comparative latecomer to Sri Lanka but has since 2010 invested heavily in the country's infrastructure. Last September, Sinopec started a fuel import and distribution business in Sri Lanka.
The competition between China and India for influence in Sri Lanka's energy sector is likely to intensify in the coming years.