Lanka’s $2.8 bn oil refinery drive to reduce fuel import dependence

By the Editorial Team · Sunday, September 6, 2026

Sri Lanka is launching a $2.8 billion project to double the Sapugaskanda Oil Refinery’s capacity from 50,000 to 100,000 barrels per day through a Build-Operate-Transfer partnership that maintains public ownership with private investment. This expansion aims to achieve fuel self-sufficiency, reduce reliance on imports, and position the country as a regional petroleum export hub, enhancing its energy security.

Sri Lanka is advancing a $2.8 billion expansion project for the Sapugaskanda Oil Refinery aimed at increasing the nation's refining capacity and reducing dependence on imported fuel. The Ceylon Petroleum Corporation (CPC) announced details of the initiative, which involves constructing a new refinery alongside the existing facility under a Build-Operate-Transfer (BOT) model.

The planned development would double the refinery’s processing ability from 50,000 barrels per day to 100,000 barrels per day. Unlike outright privatization or a traditional Public-Private Partnership, the government intends to implement a structured project financing strategy that maintains public ownership while involving private sector investment under the BOT framework. CPC Managing Director Mayura Neththikumaraage emphasized that the ongoing evaluation of assets is not a precursor to privatization.

Ernst & Young (EY) has been engaged to conduct a comprehensive business valuation of the refinery’s assets, with the assessment expected to be completed by October 2026. Earlier this year, the government solicited expressions of interest (EOIs) globally, attracting 20 responses from a range of international investors. The Technical Evaluation Committee (TEC) has already reviewed these submissions and the Cabinet of Ministers will soon receive a finalized Request for Proposal (RFP) to invite shortlisted bidders.

Following the selection of a partner, the joint venture is slated to finance the project, which will unfold over three years. The first year is designated for engineering and design work, while construction will span the subsequent two years. The project also involves expanding the refinery’s physical footprint, with land acquisition and demarcation processes nearing completion to accommodate the new infrastructure.

The scope of the Sapugaskanda Oil Refinery Expansion and Modernisation (SOREM) project includes integrating the new facility with the existing 60-year-old refinery, creating a single interconnected complex. Officials stated that the initiative's goals are to achieve full local fuel self-sufficiency and position Sri Lanka as a regional hub for petroleum exports, thereby enhancing the country’s energy security and economic resilience.

This undertaking reflects Sri Lanka's broader strategy to address the growing demand for refined fuels domestically while reducing vulnerability to volatile global oil markets. The successful implementation of the SOREM project may mark a significant milestone in the nation’s energy sector development.

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