SINOPEC which Refuels Over 10,000 International vessels, Arrives at Hambantota Port
SINOPEC the biggest Petrochemical company in China which refuels over 10,000 International Vessels globally, arrives at Hambantota Port in their facility certified by the Lloyd’s Register meeting the International Maritime Organization demand for IMO 2020 VLSFO in the Indian Ocean. The SINOPEC company also bids it’s interest to enter Sri Lankan local market for fuel import, distribute and sell petroleum products.
The Hambantota port is sited in a small fisheries village called Hambantota, in Sri Lanka which is known by many worldwide due to the limelight given by western mainstream media with regard to the “debt trap” diplomacy narrative. The port itself is a unique economic pivot to relink the ancient maritime silk route hence it was prioritized by China’s Belt & Road Initiative. The ancient maritime trade silk route flourished between the 2nd century BCE to 15th century AD and during this era, a port in the Hambantota area was known as a center linking the maritime silk route. The name of the city Hambantota was derived from the Sinhala word “Thota” meaning “Port”, and it is said that the Chinese and the Arabs used to stopover in the Hambantota region when transporting trade by the sea.
The Hambantota Port is located at the southern tip of Sri Lanka facing the ‘East-West Shipping Route’, about 10 nautical miles from the world’s busiest maritime route linking Europe and Asia. The Port which was proposed by the Sri Lankan government in the 1970s was finalized by 2010 and constructed in the first phase by the China Harbour Engineering Company, under a 15-year commercial loan from EXIM Bank of China which cover around 85% of the cost. However, at present, it is operated under the Hambantota International Port Group as a joint venture and a strategic development project of the Sri Lankan government and China Merchants Port Holdings. Since the beginning of its official operation under the joint venture at the end of 2017, the Port has developed into an important international transfer center for ro-ro vehicles in South Asia, and according to the company website, the management is focusing on implementing an overall Port-Park-City (PPC) development model which is unique and pre-experimented by to China Merchants Bureau in the Shekou City in Shenzhen where the headquarters of CMPort is based. The Port development model of Hambantota Port accelerates investment attraction, develops industrial parks in the port, and focuses on building five platforms for port services, maritime services, energy services, integrated logistics, and port-related industries.
The port is located from shipping lanes crisscrossing the East and the West, thereby positioning it as a gateway for energy services is beneficial for many stakeholders in the maritime industry. As 30,000 – 40,000 ships pass along this route every year, the Hambantota Port decided to serve that traffic by entering into an investment with the Chinese top Petrochemical giant Sinopec, which is a subsidiary of Sinopec Group – China’s largest oil and petrochemical products supplier. Sinopec is a major state-owned enterprise in China with a storage capacity exceeding one million cubic meters, in addition, it operates in 40 key ports worldwide with a clientele spread across more than 30 countries globally.
In 2019 after finalizing negotiations, Sinopec established Sinopec Fuel Oil Sri Lanka Co., Ltd. in Sri Lanka in order to develop the overseas oil supply market, and signed an agreement with China Merchants Hambantota International Port Group for Port trade and oil depot terminal operation and maintenance. Sinopec established a wholly-owned subsidiary in Sri Lanka to operate an overseas oil supply business platform for bunkering with the use of Hambantota Port Tank Farm and also showed interest to Expand into an Oil Refinery in Hambantota.
In April 2020, Sinopec’s Hambantota oil depot was officially put into operation, upon finalizing all the required soft infrastructure, and the Hambantota tank farm was issued the FSS certification (Fitness for Service) by Lloyd’s Register which is one of the world’s most respected and leading providers of classification, compliance, and consultancy services to marine and offshore industries. The Lloyd’s Register certification on Fuel Storage, Pumping, Firefighting & Jetty infrastructure facility will further strengthen the Hambantota Port operation across the maritime world. The Hambantota Port undertook two phases of the oil tank refurbishment which includes a storage network with 11 tanks, associated pipelines, and 8 loading/unloading arms of two 610m jetties, which are all included in the certification.
The fuel storage at the Hambantota Port has a maximum capacity of 51,000 m3 for Very Low Sulphur Fuel Oil (VLSFO) and 23,000 m3 for Marine Diesel Oil (MDO) which could cater to the demand for new global shipping regulations. The global low sulfur requirements ships in international seas or the “IMO 2020” came into force on 1 January 2020 under the MARPOL convention, a critical environmental treaty under the auspices of the International Maritime Organization– the United Nations specialized agency responsible for developing and adopting standards for preventing pollution from ships, as well as shipping safety and efficiency, and maritime security.
Since then the demand for VLSFO increased globally, as the rule limits the sulfur in the fuel oil used on board ships operating outside designated emission control areas to 0.50% m/m (mass by mass) – a significant reduction from the previous limit of 3.5% and within specifically designated emission control areas, the limits are already stricter (0.10%). This new limit was made compulsory following the above-mentioned amendment to Annex VI of the International Convention for the Prevention of Pollution from Ships (MARPOL).
The Hambantota Port could focus on bringing cost-competitive low sulfur fuel to local players who will in turn bring their global clients to Sri Lanka. Sinopec has set a company-wide target of 10 million tonnes of production capacity to supply low-sulfur bunker fuels that meet the cleaner emission standards set by the International Maritime Organization. Presently, the Hambantota Port is one of the newest ports to be able to supply VLSFO, the facility also includes Oil Sample testing/laboratory services for internationally accepted components and ingredients of the MFO (VLSFO, MGO), LPG, LNG, and freshwater, Waste Oil Treatment Facility and Honeywell EPKS based redundant control system. Moreover, the Port includes a 66,000 m3 capacity Liquefied Petroleum Gas terminal and plans to build a Liquefied Natural Gas (LNG) terminal with a capacity of 160,000 m3 in the future.
The Hambantota Port and the Sinopec Fuel Oil Sri Lanka Company provide resources and fuel supply services for ships sailing on the main routes of Asia and Europe in the Indian Ocean., and the port can position itself as a pivotal energy hub in the region, targeting the growing energy demand. According to reports, the Hambantota Port has great potential in energy services given its location on the Indian Ocean rim, where 50% of the world’s maritime oil is traded. So far, the facility has wholesaled more than 110,000 tons of marine fuel to local ship fuel supply companies. The Hambantota International Port’s extremely advantageous geographical location is no longer arguable with extraordinary potential for growth as it’s an important fulcrum of China’s Belt & Road Initiative. The port project went through all phases of development from funding, construction, and operational support and at present, the port is open for investments, technology transfer, and business opportunities within and outside of the port premises. However, the biggest challenge for Sinopec Sri Lanka is to build Sinopec’s overseas oil depot operation in the Indian Ocean and maintain its benchmark, in order to grow as a comprehensive service center for ship oil refueling on international routes in South Asia. The China Merchants Hambantota International Port Group still needs relevant preferential investments, and policies to support the development of the port, attract international shipowners to refuel at Hambantota Port, and jointly expand and strengthen the marine fuel supply business to Hambantota. Moreover, the Hambantota district needs to attract more support services in order to promote and realize the Sustainable and high-quality development of the Port.
Since 2022, Sri Lanka’s economy has been deteriorating, and the domestic energy supply is seriously insufficient, especially since the fuel oil for power generation is extremely short. Sinopec Fuel Oil Sri Lanka Company and China Merchants Hambantota International Port Group are now developing the required soft and hard infrastructure to improve the supply of marine fuels, but it’s also a good opportunity for Sri Lanka to bring in another international company to enter Sri Lankan domestic fuel market. However, Sinopec was interested in entering the Sri Lankan market back in 2002 as a subsidiary of the China Petroleum and Chemical Corporation. Yet, the company was rejected back then, and currently, Ceylon Petroleum Corporation and Indian Oil Company dominate the market share in Sri Lanka.
Conclusively, The Hambantota Port is a unique example of how Belt & Road Projects can benefit, not only by funding and construction but also by other required technical know-how and management skills to bring a win-win situation for all parties involved.
The writer is an Independent Researcher On Maritime Affairs and BRI development. He graduated from Dalian Maritime University, and in 2016 he completed a Master’s Program in Environment and Natural Resources Protection Law at Ocean University of China. He is the Co-Founder of Belt & Road Initiative Sri Lanka (BRISL), an independent and pioneering Sri Lankan-led Organization, with strong expertise in BRI advice and support. He can be reached via e-mail: info@brisl.org or Twitter – @YRanaraja
