Chinese Sinopec wants to open a refinery on the outskirts of India
Chinese state energy giant Sinopec is pushing for greater market access to Sri Lanka, where rival India is also looking to expand its presence, as it seeks to build its first fully-owned overseas refinery, reflecting a shift in the company's global strategy to offset slowing demand growth at home. The news was reported by Reuters .
Sinopec , the world's largest oil refiner, is expected to complete a feasibility study by June for a plant at the Chinese-owned Belt and Road port of Hambantota, after winning Colombo's approval last November , two senior industry sources with direct knowledge of the matter told Reuters.
While Chinese sources say the investment, which Colombo has valued at $4.5 billion as the country's largest ever foreign investment, is driven by commercial reasons, neighboring India is pushing a rival plan to build an oil pipeline of fuel products to the south-eastern island nation of the subcontinent, thus seeking to take control of the island's fuel market.
Sinopec's effort to build a refinery with a more domestic focus, rather than the export-focused project sought by Sri Lanka, which has not been previously reported, puts it in direct competition with India's interests to expand its role as energy supplier to the country. Indian Oil Corp , run from New Delhi, is the country's second largest fuel supplier, after Ceylon Petroleum Corp, owned by the Sri Lankan government. At this point there would be a big, third, inconvenience.
Sinopec, which has not disclosed its strategy, is prioritizing the investment in Sri Lanka and another in Saudi Arabia under a newly launched investment arm, in a bid to leverage its industry experience and deep pockets to expand globally as oil demand nears its peak in China as economic growth slows and the adoption of electric vehicles, the sources said.
Sinopec's efforts mark a new trend in Chinese overseas oil and gas investment, after mergers and acquisitions shrank to just $344 million in 2023, a fraction of the record $31 billion in 2012, according to LSEG data, following the 2014/15 oil price collapse and as Beijing tightened control over the finances of its domestic oil giants.
Divergent interests and a power struggle
The project, however, sees a divergence of interests between Colombo and Beijing: if China wants to gain control of the island's growing internal market, the local government, hungry for foreign currency, would like a plant that dedicates a good part of its production to export and not to the domestic market. The local government would like 80% of production to go abroad, thus providing the country with hard currency.
However, this Chinese investment clashes directly with Indian projects, which, in agreement with Sri Lanka, involve the construction of large energy links between the subcontinent and the island. India has major interests in Sri Lanka and invested four billion dollars in emergency financial assistance during the recent financial crisis. New Delhi is unlikely to let this market be conquered by Beijing, at a time when Chinese agreements with Pakistan are extremely active and Chinese influence is also expanding to Mauritius.
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The article Chinese Sinopec wants to open a refinery on the outskirts of India comes from Economic Scenarios .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/la-cinese-sinopec-vuole-aprire-una-raffinerie-alle-porte-dellindia/ on Mon, 29 Apr 2024 07:00:29 +0000.