Sri Lanka is advancing plans for a new $2.8 billion oil refinery project aimed at reducing the country’s dependence on imported fuel. The initiative, which involves a capital investment of approximately $2.77 billion, is designed to expand domestic refining capacity and decrease the nearly $4.23 billion the nation currently spends annually on oil imports.

Financial assessments of the project highlight its strong economic potential. The net present value (NPV) is estimated at $1.5 billion, based on a 10 percent discount rate, indicating robust viability. The internal rate of return (IRR) is projected at 16.1 percent over a standard operational period of 20 years, with a payback period anticipated at six years.

Officials expect the refinery to generate significant cash flow, with annual earnings forecasted between $30 million and $700 million. Over two decades, cumulative cash flows could exceed $9 billion, reflecting the strategic goal of improving energy self-sufficiency and fiscal balance.

The new refinery aligns with Sri Lanka’s broader objective to curtail foreign exchange losses tied to fuel imports by increasing domestic production of refined oil products. By doubling internal refining capacity, the government aims to mitigate exposure to global oil price volatility and enhance energy security.

Construction and operational timelines have not been detailed publicly, but the government’s commitment to reducing import dependence signals a priority focus on this project within its energy sector development plans.