Indian-Omani group strikes $3.85 bln deal to build Sri Lanka oil refinery (updated)

China Harmony Auto Holding

19/03/2019 13:24

(Recasts to lift India-China element)
    By Shihar Aneez and Ranga Sirilal
    COLOMBO, March 19 (Reuters) - India's Accord Group and
Oman's Ministry of Oil and Gas have signed a $3.85 billion deal
to build an oil refinery in Sri Lanka, the biggest single pledge
of foreign direct investment ever made in the country. 
    The deal represents a challenge to China, which had until
recently been on track to be the dominant foreign investor on
the island, and a possible coup for New Delhi. 
    India has been concerned in the past few years about China
muscling into Sri Lanka and other countries in the region where
India is the traditional power.
    Sri Lankan officials said the 200,000 barrel-per-day
refinery will be built on 585 acres near the site of the new
Hambantota international port and a related industrial zone on
the nation's southern coast. 
    The refinery, construction of which is expected to begin on
March 24 and be completed in 44 months, is set to produce 9
million metric tonnes of refined products a year for export from
the Hambantota port, which serves the busiest East-West shipping
route.
    Privately owned Accord Group will control 70 percent of the
joint venture and the Sultanate of Oman's Ministry of Oil and
Gas the rest.
    Accord's ownership comes through a Singapore investment
vehicle which is 90-percent owned by its Silver Park
International Pvt Ltd operation.    
    China Merchants Port Holdings  0144.HK , China Harbour
Engineering Corp and other Chinese companies are investors in
the port and industrial zone. 
    China's separate $1.4 billion financing of facilities on
reclaimed land near the nation's main Colombo port is currently
the island's biggest single foreign direct investment.
    Tensions between India and China have created political
turmoil in Sri Lanka. A bust-up between President Maithripala
Sirisena and Prime Minister Ranil Wickremesinghe over how far to
accommodate Indian interests led to months of political chaos
late last year.
    India fears Sri Lanka, just off its southern coast, could
become a Chinese military outpost.
    The refinery will be Chennai-based Accord's first foray into
oil refining. Its current interests include power generation,
brewing and healthcare.
    The joint venture plans to invest $1.89 billion in share
capital and $1.96 billion via loans, the project document seen
by Reuters showed.
    "With this refinery, our exports will grow by $7 billion per
year," Nalin Bandara Jayamaha, Sri Lanka's deputy minister of
development strategies and international trade, told reporters
at a news conference in Colombo.
    The industrial zone at Hambantota has been delayed by a land
acquisition process which has been hit by protests by local
residents.
    Mangala Yapa, an advisor to Sri Lanka's development
strategies ministry, said 200 acres to house the venture's oil
tanks were already available and another 385 acres are being
acquired, while an environmental impact assessment is underway. 
    "We are doing a site-specific EIA (environmental impact
assessment). Since already there are oil tanks in Hambantota, we
do not see any issues," Yapa said. 
    An official at Singapore-based Silver Park International Pte
Ltd confirmed the refinery investment, but declined to comment
further. The company has been registered in Singapore since June
2017.
    The Omani government entity was not immediately available
for comment.

 (Additional reporting by Jessica Jaganathan in Singapore and
Nidhi Verma in New Delhi; Edited by Martin Howell and Jan
Harvey)
 ((shihar.aneez@thomsonreuters.com; +94-11-232-5540; Reuters
Messaging: shihar.aneez.thomsonreuters.com@reuters.net
twitter:@shiharaneez))