BOI Chairman Mangala Yapa (left) and Sugih Energy International Director Danny Lee
Sri Lanka’s geographical locational advantage between Singapore and the Middle East, and the availability of a new deep-water Port in Hambantota make the island an optimum location for establishing export-oriented petroleum and other commodity processing facilities.
Promoting the country’s prospects as an investment destination against this backdrop, the BOI’s efforts have resulted in an investment proposal from Hambantota Oil Refinery Ltd., an affiliate company to Sugih Energy International Ltd., which is a privately-owned petroleum and coal trading company based in Singapore. The proposed investment is to set up a petroleum refinery with a 420,000 barrels/day capacity for export markets at Hambantota, which amounts to approximately $ 24 billion, over a period of 60 months, making this the largest Foreign Direct Investment (FDI) project to date. The initial phase will involve the commissioning of the petroleum refinery with plans for development of a petrochemical complex in subsequent phases. Export revenue envisaged upon commissioning of the refinery is expected to be around $ 8-9 billion annually.
The BOI having approved the project in principle in July last year, the ensuing period has been utilised to obtain concurrence and approvals of all relevant Government agencies and organisations including the Cabinet of Ministers. With the BOI Agreement now signed, the immediate next step is a comprehensive Environmental Impact Assessment (EIA) compliant with the Terms of Reference already issued by the Central Environment Authority (CEA) and other regulatory bodies, to be conducted prior to implementation of the project. This EIA will be augmented with a Health and Safety assessment, which, though not mandatory, will ensure the project is in line with industry best practices while ensuring the enhanced sustainability of the project.
The refinery has projected demand for employment ranging from medium to high-end skill levels (operators, technicians, graduates, engineers, chemists, etc.) with direct employment opportunities for almost 6,500 Sri Lankans while creating further indirect employment opportunities in support services. This project can be considered a catalytic investment which will boost liquid cargo shipments to the Port of Hambantota, thereby resulting in added revenue in foreign currency for inward/outward movement of ships carrying crude oil and finished products. Additionally, the refinery will also enable transformation of the Port of Hambantota as a Marine Bunker Port, taking full advantage of its proximity to international maritime routes.
Given that a current economic priority of Sri Lanka is the attraction of export-catalytic FDI, which in turn is expected to realise rapid and sustainable economic growth while creating high-income generating employment, an investment of this magnitude augers well for the island’s ambitious national level goals.