A top-level delegation to China led by Treasury Secretary P.B. Jayasundera last month secured a loan facility worth US$1.5 billion from a Beijing state bank to finance local projects and also explored the possibilities of more assistance for infrastructure and other development projects from China, informed sources said.
The two projects to be part-financed with the loan are the Sapugaskanda oil refinery refurbishment and Moragahakanda development project.
According to the sources, the Chinese bank has already studied the feasibility report on the proposed refinery expansion from 50,000 barrels per day to 100,000 barrels.
While the oil refinery, which needs $2 billion for a complete overhaul, will get $1.25 billion, Moragahakanda will receive the balance $252 million from the Chinese loan.
The sources said the Sri Lankan side also sought the support of Chinese state agencies to tackle the country's balance of trade issues, exploring the possibility of increasing exports to China as the trade balance is currently unfavourable to Sri Lanka.
Against this backdrop, Petroleum Industries Minister Susil Premajayantha said they have turned down an offer from Lanka IOC to invest in renovating the Sapugaskanda refinery.
He said the government has been seeking a foreign loan facility of $2 billion to refurbish the refinery to increase its capacity. Speaking to the Business Times, he said he was unaware of the Chinese loan offer.
Earlier Lanka IOC said it was willing to invest up to $2 billion to upgrade the ageing refinery. K.R. Suresh Kumar, outgoing Managing Director of Lanka IOC, said his company was ready to assist Sri Lanka in whatever possible manner towards refurbishing or revamping the facility, and had conveyed their interest in writing to the Petroleum Industries Minister recently.