Iran Agrees to Build New Re­fin­ery For Sri Lanka

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COLOMBO (Reuters) - Iran has agreed to build a new oil re­fin­ery for Sri Lanka in ad­di­tion to up­grad­ing its age­ing 50,000 bar­rel per day (bpd) state-owned re­fin­ery, Sri Lankan cabi­net spokesman Ra­jitha Senaratne said.

Ira­nian of­fi­cials pledged the new re­fin­ery when Sri Lanka Pres­i­dent Maithri­pala Sirisena made an of­fi­cial visit to Tehran over the week­end, the first leader to go to Iran since U.S. Pres­i­dent Don­ald Trump reim­posed U.S. eco­nomic sanc­tions.

“They even agreed to help Sri Lanka to build a new re­fin­ery,” Senaratne told Reuters when asked if Sri Lanka sought as­sis­tance to re­fur­bish its cur­rent re­fin­ery.

“We only spoke about the con­cepts and they promised to send a team (for fur­ther talks).”

Senaratne did not elab­o­rate how the Sri Lankan government would deal with Ira­nian fi­nan­cial trans­ac­tions in the face of U.S. sanc­tions.

Sri Lanka has a sin­gle, 50,000 bpd oil re­fin­ery in Colombo sub­urb Sa­pu­gaskanda, built by Iran in 1969 to re­fine Ira­nian light crude. How­ever, when tough­ened sanc­tions were im­posed on Tehran in 2012 to curb its nu­clear am­bi­tions, state-run Cey­lon Pe­tro­leum Cor­po­ra­tion (CPC) was forced to look for other light crudes.

The ex­ist­ing re­fin­ery ac­counts for 30 per­cent of Sri Lanka’s fuel re­quire­ment, but the head of CPC last week said that up­grad­ing “may not be the so­lu­tion” be­cause Sri Lanka needs a re­fin­ery ca­pa­ble of han­dling all types of crude. Iran’s of­fer comes as Chi­nese, Mid­dle East and Rus­sian com­pa­nies are in “pre­lim­i­nary dis­cus­sions” to build a 100,000 bpd re­fin­ery for CPC.

Two Chi­nese com­pa­nies have jointly bid for a 100,000 bpd re­fin­ery, with an­nual out­put of about 5 mil­lion tons a year, in the south­ern town of Ham­ban­tota, where China con­trols a sea port and plans an in­dus­trial zone. Sri Lanka is still in talks about the Ham­ban­tota re­fin­ery, though the government has blocked a pro­posal by the Chi­nese com­pa­nies to sell fuel lo­cally. Sri Lanka has also dis­cussed another 100,000 bpd re­fin­ery in part­ner­ship with In­dian Oil Corp, but there has been no progress on that plan.

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