China's oil giant Sinopec eyes business in Sri Lankan gas & energy market amid crisis

China's largest oil and energy corporation, Sinopec, is looking at retail business opportunities in the Sri Lankan fuel market as the South Asian island continues to suffer a stifling economic crisis. According to local media reports, the Beijing-based enterprise is hoping to enter the Lankan petroleum market to import, sell and distribute products despite the choppy fuel market on the island.

This comes after the newly-elected cabinet approved the proposal forwarded by Lankan Power and Energy Minister Kanchana Wijesekera to allow more oil-producing nations to invest in retail operations in Sri Lanka.

What is Sinopec?

Sinopec Limited or China Petroleum & Chemical Corporation is the largest energy, oil, and gas enterprise based in Beijing. It is under China's Petrochemical Corporation (SASAC), headed by Zhao Dhong. It is the largest oil and petrochemical product supplier and the second largest oil and gas producer in China. Sinopec is also listed as the largest refining company and third largest company globally to have incorporated in Sri Lanka, as per a Ministry of Foreign Affairs press release (2019). The company already has invested in the Lankan Hambantota port for which it had applied under BOI section 17 as Hub Operation. Further, it also secured a bunkering license to carry out marine fuel supply business at the said port from Q4 2019.

Sri Lanka unable to untangle itself from Beijing's 'debt trap': Report

According to Lankan national media Daily Mirror, the added Chinese investments in the form of business development comes at a time when Colombo is already reeling under Beijing's "debt trap" following years of reckless borrowing from China (and other nations as well.) Compounded with ill-timed taxes and pandemic-related drawbacks, the island of 22 million people is currently facing a severe shortage of food, fuel, and other basic supplies. Long queues outside petrol pumps have become common view after the country crept to the edge of exhausting its reserves. In addition, the prices of fuel have fluctuated massively subject to availability.

China being the top creditor to Lanka, Colombo approached Beijing for a $1 billion loan to meet the foreign debt obligations. In addition, Sri Lanka also requested a $1.5 billion credit line to purchase Chinese goods in order to mitigate the acute shortages on the island. Nevertheless, Lanka media reports claimed that China "turned a blind eye" to Colombo's calls, without any progress even after months of talks over the requests.

The Lankan economy is under sharp contraction as the currency depreciated by at least 80% since March this year. Further, with over $50 billion in foreign debt, the country barely has basic imports for domestic production. Under the current economic situation, at least 5.7 million people on the island are in dire need of humanitarian assistance, said the United Nations.

(Image: AP/Unsplash/@RanilWickremesinghe/FB)