An agreement to build a proposed $3.85 billion oil refinery in Sri Lanka will take at least a year to be finalized as its main investor, India’s Accord Group, says it is yet to recruit partners and conduct an assessment of the plan’s viability.
The comments add to confusion about the project, which was announced last week by the Sri Lankan government as the nation’s largest single foreign direct investment ever, but has since been the subject of conflicting statements by various parties.
Accord’s Chairman S Jagatrakshakan, a former Indian government minister, said he has submitted a preliminary proposal to the Sri Lankan government to invest in the project but has not finalized any terms of the deal.
“The project assessment and financial viability assessment will take at least a year. We have not sorted out any of the equity partners for the projects, but are in talks with investors from many countries,” he told Reuters over the phone from the southern Indian state of Tamil Nadu.
The 68-year old politician is campaigning in Tamil Nadu for a seat in the current general election. He was an MP and minister in the last Congress-led government in 2009-2014.
When the Sri Lankan government made the announcement on March 19, it said the oil refinery would be a joint venture between Oman’s oil ministry and Accord and cost $3.85 billion.
A day later, Omani officials denied involvement in the project, but the middle eastern country’s oil minister arrived in Sri Lanka three days later and said he was “excited” to inaugurate the project though there was no indication of a firm deal in place.
India and China have been vying for political influence in Sri Lanka in recent years, with investment a key part of the battleground.
The refinery’s proposed site is 585 acres of land near the site of the new Humbantota International port and a related industrial zone – both run by Chinese entities – on Sri Lanka’s southern coast.
A Sri Lankan government document seen by Reuters showed the previously proposed deal would have a debt to equity ratio of 51:49, and said the Accord Group’s Singapore entity, Silver Park International Pte Ltd, would fund 70 percent of the equity, with Oman funding the rest.
However, Jagatrakshakan said he expected 70 percent of the project to be bankrolled by debt from financial institutions, adding that Silver Park would get more investors to fund the equity stake.
“We are looking at getting 20-30 investors on board for the 30 percent equity investment in the project. We expect 70 percent of the project to be bankrolled by debt from financial institutions,” he said.
A senior official at Sri Lanka’s Strategic Development and International Trade ministry, speaking on the condition of anonymity, said he was confident of the terms of the deal as originally announced by the government.
He said Jagatrakshakan’s son Sandeep was also present when the deal was signed. Sandeep Jagatrakshakan did not respond to repeated calls seeking comment.
China is the biggest buyer of Omani oil, importing about 80 percent of the Middle Eastern nation’s overall crude exports in January, according to Oman government data.