By Shihar Aneez
COLOMBO (Reuters) - The Sri Lankan government said on Thursday that Oman's government-controlled Oman Oil Co has made clear that it is interested in taking a 30 percent stake in a new oil refinery project on Sri Lanka's south coast.
The Oman oil ministry on Wednesday denied that it had agreed to acquire the stake, saying it knew nothing about the investment that was announced by Sri Lanka's government the previous day. Sri Lankan officials had said that a Singapore entity controlled by the Indian company, Accord Group, would take a 70 percent stake.
Sri Lankan Prime Minister Ranil Wickremesinghe told parliament on Thursday that the Oman government has sent a letter saying it is interested in the $3.85 billion project, which could become the island nation's biggest direct foreign investment, and there have been discussions about a 30 percent stake. He said that could rise to 40 percent.
Earlier in the day Sri Lanka's investment board said that Oman Oil Company had "registered their firm intention to participate in equity up to 30 percent, subject to reaching agreement between the parties".
It is the second time in recent months that Sri Lankan officials have announced a deal before it has been completed, forcing them into hurried explanations.
Finance Ministry officials failed to secure a $300 million loan that they said was offered by Bank of China and was to be received before the end of January. Ministry officials this week said that the loan is still being discussed.
Any big deal in Sri Lanka involving Indian investment will pose a challenge to China, which until recently had been on track to be the dominant foreign investor on the island.
India has become concerned in recent years about China muscling in to Sri Lanka and other countries in a region where India is the traditional power.
The planned refinery will be built next to an investment zone China Harbour Engineering Corp is planning and a $1.4 billion port controlled by China Merchants Port Holdings.
Chinese Foreign Ministry spokesman Geng Shuang told a regular news conference in Beijing that he was not aware of the refinery project but China has "an open attitude towards India and others having mutually beneficial cooperation with Sri Lanka".
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 an Oman government website.
Sri Lanka's investment board also said that another Oman entity, Oman Trading International, is willing to supply the entire feedstock requirement for the project and take on the marketing for its refined oil products, such as gasoline.
Wickremesinghe will launch part of the project, the building of the oil storage tanks, on Sunday at a ceremony on his 70th birthday.
That first phase of the project will cost an estimated $1.85 billion and be paid for by Accord. The construction and operation of the refinery at an estimated cost of $2 billion would be paid for by the Accord-Oman venture, investment board officials have told Reuters.
(Writing by Martin Howell; Editing by Tom Hogue and David Goodman)