India, UAE to develop Sri Lanka energy hub

COLOMBO/NEW DELHI: India and the United Arab Emirates agreed to develop an energy hub in Sri Lanka, India’s foreign ministry said on Saturday, as New Delhi’s competition with China grows in the Indian Ocean island nation.

The three nations signed the pact for the hub during Indian Prime Minister Narendra Modi’s visit to Sri Lanka, the first by a global leader since Sri Lankan President Anura Kumara Dissanayake took office in September.

New Delhi and Colombo have worked to deepen ties as India’s southern neighbour recovers from a severe financial crisis triggered in 2022, during which India provided $4 billion in financial assistance.

Saturday’s agreement boosts New Delhi’s competition with China, whose state energy firm Sinopec (600028.SS) has signed a deal to build a $3.2-billion oil refinery in Sri Lanka’s southern port city of Hambantota.

The energy hub in the strategically important city of Trincomalee, a natural harbour in the Sri Lanka’s east, will involve construction of a multi-product pipeline and may include using a World War Two tank farm partly held by the Sri Lankan subsidiary of Indian Oil Corp IOC.NS, Indian Foreign Secretary Vikram Misri told reporters in Colombo.

The energy hub in the strategically important city of Trincomalee, a natural harbour in the Sri Lanka’s east, will involve construction of a multi-product pipeline and may include using a World War Two tank farm partly held by the Sri Lankan subsidiary of Indian Oil Corp IOC.NS, Indian Foreign Secretary Vikram Misri told reporters in Colombo. “The UAE is a strategic partner for India in the energy space and therefore was an ideal partner for this exercise that is being done for the first time in the region,” Misri said. “The exact contours of UAE’s role will be elaborated once the business to business discussions kick off.” The three nations will next choose business entities that will consider the financing and feasibility of projects for the hub, he said.

Modi also inaugurated a $100 million solar power project, a joint venture between Ceylon Electricity Board and India’s National Thermal Power Corp NTPC.NS.

India and Sri Lanka also concluded their debt restructuring process, Foreign Secretary Misri said. Sri Lanka owes about $1.36 billion in loans to EXIM Bank of India and State Bank of India, according to Sri Lanka Finance Ministry data. Colombo kicked off debt restructuring talks after it defaulted on its debt in May 2022, signing a preliminary deal with bilateral creditors Japan, India and China last June. India and Sri Lanka also signed pacts on power grid connectivity, digitalisation, security and healthcare.

Earlier, Sri Lankan President Anura Kumara Dissanayake rolled out the red carpet for Modi and conferred on him the country’s highest civilian honour for “the deep personal friendship” shown to the smaller neighbour.”We believe that our security interests are aligned,” Modi said during a televised ceremony from Dissanayake’s office in the capital. “Our security is interdependent and interconnected.”A five-year defence cooperation agreement provides training of Sri Lankan military personnel in India as well as information and technology sharing.Dissanayake applauded what he called “India’s rise as a world power, not just a regional power”.