Subir Bhaumik
In a move that will up alarms in India, China’s giant conglomerate Sinopec is entering Sri Lanka’s energy market with its inaugural overseas refinery at the Chinese-managed Hambantota port. Sri Lanka approved the $4.5 Bn investment in November.
Doubtlessly, this strategic move flags Sinopec’s ambition to offset declining growth in China’s oil demand and move capacity in emerging markets in developing economies. Sri Lanka figures prominently in China’s Maritime Belt & Road Initiative which is designed to give Beijing control over crucial Indian Ocean lanes.
Sinopec’s refinery project was geared more towards meeting Sri Lanka domestic needs, contrary to Sri Lanka’s export-oriented preference, intensifies the rivalry with India.
Despite India’s significant fuel supply role in Sri Lanka, Sinopec’s initiative signals a strategic contest for market dominance.
Driven by a newly launched investment arm, Sinopec is prioritizing global expansion, with Sri Lanka and Saudi Arabia as focal points. As China’s oil demand approaches saturation amid economic deceleration and rising electric vehicle adoption, Sinopec seeks to leverage its expertise and financial strength in overseas ventures.
This endeavor represents a departure from previous trends in Chinese oil investments abroad, which dwindled post-2015 due to oil price fluctuations and heightened financial scrutiny by Beijing.
Sinopec’s meticulous planning includes finalizing plant specifications and negotiating market access terms with Colombo, that was critical in influencing its investment decision.
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