Sri Lanka seeks lenders for $ 2 b refinery expansion

Reuters: Sri Lanka is negotiating with lenders including China for a credit of up to $ 2 billion to double the capacity of a decades-old oil refinery, after the Government failed to find an investment partner for a proposed Iranian-backed overhaul.

Sandya Wijebandara, the top civil servant at the Ministry of Petroleum Industries, said the Government was seeking another lender after failing to find an investor to contribute 30 per cent to a $1.7 billion deal with Iran’s state-run Oil Design and Construction Company.

“Now we are looking for a lender and not an investor. We have had negotiations with several parties including a Chinese delegation for funding,” Wijebandara told Reuters.

The Sri Lankan Government wants to double the capacity of the Sapugaskanda refinery to 100,000 barrels per day, and the cost of the project has risen to $2 billion.

In August the Government said it had talked to Russian and South Korean delegations about possible investments.

China, Sri Lanka’s largest source of funding in 2009 and 2010, has lent at least $3.43 billion so far this year.

The Indian Ocean nation has been borrowing heavily to revitalise long-neglected infrastructure projects to attract foreign investment since the end of a 25-year war in May 2009.