CM Port steams ahead with Hambantota opportunity

Monday, 25 September 2017 00:00 -     - {{hitsCtrl.values.hits}}


  • Aims to begin by Nov., calls on SL private sector to join effort 
  • Targets investment for zone, bids received for $2.5b refinery 
  • CM Port mulls tying up with Sinopec or China Petroleum on bunkering 
  • Insists decision to takeover port was purely a business decision
  • Says H’tota can become a global port provided broader reforms happen   

By Uditha Jayasinghe 

Converting the newly acquired Hambantota into a global maritime centre to partner with the country’s growth and attract investment would be the key aim of China Merchant Ports Holdings, a top official said calling on local companies to join the effort. 

China Merchant Port Holdings (CM Port) entered into $1.12 billion partnership with the State-run Sri Lanka Ports Authority (SLPA) in July to take over the port after many months of negotiations. The company also expects to invest $600 million to make the port fully operational. 

The Chinese company may begin operations in November once the two subsidiary companies with the SLPA are established. Land held by the port will be invested with these two companies that are vested in Sri Lanka and will not be directly held by CM Port.   

 “We are targeting to turn the Hambantota port into a major hub connecting the neighboring countries as well as the rest of the world. That is the national vision of Sri Lanka and it is also our mission as an operator,” said China Merchant Port Holdings Company Deputy General Manager Hang Tian.

Addressing a group of local shipping industry representatives at the Ceylon Chamber of Commerce (CCC) on Friday, Hang insisted that the decision to take over the port had been an independent business decision and the company would work to attract significant investment to the investment zone linked to the port.

Currently large investments in three plans of cement, LNG, LPG and a petroleum refinery are being considered that could run up to about $3 billion in investment, according to the Board of Investment. Two Chinese companies have already submitted bids for the refinery. 

Responding to questions after the address, Hang also said CM Port is considering tying up with a global player such as Sinopec or China Petroleum to funnel competitively priced oil to the bunkering facilities at Hambantota and work with a local retailer to operate that aspect of the business since CM Port customarily does not supply bunkering services.     

“Our intention is to contribute to the rich vision of Sri Lanka. We are able to bring in new investment, new management methodology, and new technology by leveraging on the synergy of CM Port’s global network,” Hang added.

CM Port is currently developing a business plan that will include port services, a business incubator, integrated logistics and a vessel supply service that would attract more international companies to the Hambantota Port, Hang said. He then went on to say that CM Port is proficient is running a free port such as Hambantota as the port of Hong Kong, which CM Port has run for over 140 years as a free port.  

He also appealed to local investors to join CM Port to make the venture a success.  

“We believe Hambantota port has the potential to play a more important role in the transformation of Sri Lanka’s maritime industry and economy. The Hambantota port is closer to major marine routes than Colombo port; more importantly, it is located in southern Sri Lanka, an area that is not as developed so far; therefore, we can be certain in the long run that this port has tremendous potential to become the largest port in the country, if it is well planned and operated efficiently.”

The port’s strategic location makes it ideal to be a hub for shipment growth in South Asia and East Africa, he said, predicting that Chinese retailers would find it a lucrative investment.

However, Hang also called on the Sri Lankan Government to continue its reforms to improve the country’s ease of doing business capacity to increase its attractiveness as an investment destination.

 “Our expectation is that South Asia and Africa, especially east Africa is set to become another global factory. Sri Lanka happens to cover these two economic hinterlands, encompassing a population of 2.5 billion people seeking economic transformation. Sri Lanka’s dream of becoming an international maritime and logistics centre can be realised if it seizes this opportunity.” 

Govt. in talks with two Chinese firms for $3 b refinery

Reuters – The Government of Sri Lanka is in talks with two Chinese companies about investing up to $3 billion to build in a new refinery at its Chinese-controlled port, a top Government official said on Friday.

Sri Lanka wants to build a new refinery in its southern Hambantota port, where China Merchants Port Holdings (CMPH) has a 99-year lease to handle commercial operations.

Located near the main shipping route from Asia to Europe, Hambantota port is likely to play a key role in China’s “Belt and Road” trade route initiative.

Mangala Yapa, a director at the state-run Board of Investment, said two Chinese companies had put forward a joint venture proposal for the refinery, which is expected to produce 5 million tonnes per annum with an investment between $2.5 billion and $3 billion. He did not name the Chinese firms.

“The investment is large and we are discussing with the two companies on that basis,” he told Reuters, adding the joint venture plan was chosen from three bids including one from a U.S. company through a local partner.

“The refinery needs around 500 acres of land and we can’t reserve the land. Many people try to get the land first and then look for investors.”

Yapa did not elaborate on the plans of the proposed refinery.

China’s influence over Hambantota port has sparked widespread anger in Sri Lanka.

The deal with CMPH, which has a majority stake in the lease, fuelled speculation the port could be used for Chinese naval vessels. CMPH is also in talks with the government to develop an industrial zone next door.

This year, the government revised its original deal with CMPH to give greater influence to the Sri Lankan Ports Authority to try to allay concerns - including from Japan, the United States and India - that the port might be used for military purposes.

The investment zone deal is yet to be signed.

The Hambantota refinery will be the second new refinery the island nation has planned in the country.

Sri Lanka already has a deal for a 100,000 barrels per day-plus (bpd) refinery with Indian Oil Corp at the country’s eastern port city of Trincomalee with the aim of exporting fuel.

Sri Lanka’s sole oil refinery, state-run Ceylon Petroleum Corporation’s decades-old 50,000 bpd plant, was originally configured to run on Iranian crude and Sri Lanka had to import more refined oil products after U.S. sanctions led it to stop imports from Iran.