India, UAE, and Sri Lanka Sign Pact to Develop Trincomalee Energy Hub

India and the United Arab Emirates (UAE) have signed a landmark agreement with Sri Lanka to jointly develop an energy hub in Trincomalee, marking a significant step in regional energy cooperation and strategic engagement in the Indian Ocean. The announcement was made by India’s Ministry of External Affairs on Saturday.

The trilateral pact was signed during Indian Prime Minister Narendra Modi’s visit to Sri Lanka, the first by a foreign head of government since President Anura Kumara Dissanayake assumed office in September. The visit underscores India’s growing efforts to strengthen ties with its southern neighbor, especially in the face of increasing Chinese influence in the region.

During Sri Lanka’s 2022 financial crisis, India provided $4 billion in emergency financial support, solidifying its role as a key regional partner. The latest agreement seeks to expand that cooperation into the energy sector.

The proposed energy hub in Trincomalee, a strategic natural harbor in eastern Sri Lanka, will include the construction of a multi-product pipeline and may utilize a World War II-era oil tank farm, partly managed by the Sri Lankan subsidiary of Indian Oil Corporation (IOC).

“The UAE is a strategic energy partner for India, making it an ideal collaborator for this first-of-its-kind initiative in the region,” said Indian Foreign Secretary Vikram Misri at a press briefing in Colombo. He added that the specific role of the UAE will be detailed following upcoming business-to-business consultations.

The next phase will involve selecting business entities from the three nations to examine the feasibility, financing, and implementation of the proposed infrastructure.

Prime Minister Modi also inaugurated a $100 million solar power project, a joint venture between India’s NTPC and the Ceylon Electricity Board, as part of broader efforts to promote sustainable energy in the region.

In a further boost to economic recovery efforts, India and Sri Lanka concluded their debt restructuring negotiations, according to Misri. Sri Lanka currently owes around $1.36 billion to India’s EXIM Bank and State Bank of India, based on data from Sri Lanka’s Finance Ministry.

The two countries also signed a series of bilateral agreements focused on power grid connectivity, digital cooperation, security, and healthcare.

Sri Lanka initiated debt restructuring talks after defaulting in May 2022, and signed a preliminary agreement with its primary bilateral creditors — India, Japan, and China — in June 2023.