China's state-owned company Sinopec has entered Sri Lanka's domestic fuel market, challenging the long-standing dominance of an Indian oil firm and a local state-owned retailer. This marks the first entry of a newcomer into the Sri Lankan market in two decades and comes after months of fuel rationing caused by a foreign exchange crisis that disrupted imports last year.
President Ranil Wickremesinghe personally witnessed the signing of the agreement with Sinopec, emphasizing the importance of ensuring a steady and uninterrupted fuel supply for the nation. The fuel shortages, along with scarcities of essential goods like food and medicine, sparked widespread protests and contributed to the removal of former President Gotabaya Rajapaksa.
Under the agreement, Sinopec will take over 150 pumping stations currently operated by the state-owned Ceylon Petroleum Corporation (CPC). The company will receive a 20-year license to operate in Sri Lanka and will also have the opportunity to establish an additional 50 retail stores in the country. This move comes after the Sri Lankan government approved the entry of Chinese, Australian, and US oil giants into the local retail market, breaking the 20-year duopoly held by CPC and the Indian Oil Corporation.
Private companies entering the market will be required to finance the import of oil using their own foreign exchange reserves and will need to retain their profits in Sri Lanka for at least one year. Sri Lanka has raised fuel prices threefold in the past year to offset significant losses at CPC, which is undergoing restructuring as part of a $3.0 billion IMF bailout secured by Colombo in March.
The entry of Sinopec into Sri Lanka's fuel market represents a significant shift in the country's energy landscape and is expected to bring increased competition and potentially more stability in fuel supply. The move also highlights China's growing economic influence in the region as it expands its presence in Sri Lanka's key sectors.
