Sri Lanka’s agreement to lease the port of Hambantota to a Chinese state-owned enterprise could soon blossom into a much larger economic development strategy. Sri Lanka is reportedly in talks with two unnamed Chinese firms for the construction of a $3 billion oil refinery near Hambantota – a larger investment than the value of the port itself.
The news of the potential refinery deal comes as China Merchants Port Holdings (CMPH) is closing in on the final agreement for a 99-year lease at Hambantota. The government has already negotiated most of the financial terms, which will essentially satisfy the nation’s debt for the port’s construction.
The final signing should take place by the end of October, said chairman of Sri Lanka’s ports authority Parakrama Dissanayake in a recent interview. This timeline would allow CMPH to take over operations at the port as early as November 1.
Hambantota is located right on the busy lane between the Suez Canal and the Strait of Malacca, putting it in a strategic location for merchant shipping. It has little traffic at present, but some analysts suggest that its potential has not yet been fully realized.
