The Sunday Leader

LNG Limbo

  • Sri Lanka’s US$1.5B natural gas venture in the doldrums

by Santhush Fernando

Sri Lanka’s ambitious goal of becoming a mega global hub in energy is in jeopardy with a vital US$ 1.5 billion (Rs 214.5 billion) liquefied natural gas (LNG) project mulled by US-based energy project developer left in limbo with relevant authorities passing the buck.

Although in one hand the government announced that it would hold fresh international bidding round for the commercial exploitation of natural gas deposits found in the Mannar Basin,  on the other hand it has failed to give greenlight to a much-needed project.

“Both Ceylon Electricity Board (CEB) and the Ministry of Power and Energy are passing the buck here. A world-renowned US company – Sithe Global, which has installed capacity over a staggering 3,000 MW and with a total capital investment potential of US$5 billion, has proposed this project since 2012,” a high-ranking Power and Energy Ministry official told The Sunday Leader, on grounds of anonymity.

According to him, several parties with vested interests deliberately failed to give green light during the Rajapaksa regime, with the purpose of soliciting commissions. As per Foreign Corrupt Practices Act of 1977 of United States, it is an offence for US Companies to offer bribes to  foreign public officials.

“Sithe Global venture is very vital as they are bringing not only knowhow on LNG, which is a totally new technology to Sri Lanka. What’s more is that they are willing to fully fund it,” he added .

“It’s regrettable that a much-needed, comprehensive project such as this has to face a natural death even before the venture takes off the ground. At this rate, Sri Lanka will never be able to become even a regional player in energy, let alone a global hub,” he lamented.

According to him, the tug-of-war among government institutions, bureaucratic red-tape and undue delays, highly investor-unfriendly environment, and declining confidence amongst corporate, had left the existing players frustrated and kept new investors at bay.

“The government has to have a consistent policy on power and energy. Renegotiation of tariff will deter future investors entering the industry. But the biggest problem has been lack of transparency and inconsistency when it comes to policy,” he warned.

“Two years back, Sithe Global Power sent us a Letter of Intent (LoI) requesting to set up a fully-fledged LNG project in Hambantota inclusive of a Floating Storage and Regasification Unit -FSRU (see box)  along with exclusive monopoly for a period of six months. They have set out a clear programme stating strategy, investment schedule, and investment milestones,” he said.  According to the source, Sithe Global has agreed to construct a gas terminal along with a 500 MW power plant.

“They are willing to make the total investment whilst partnering with Ceylon Petroleum Corporation (CPC) to provide natural gas for domestic and industrial consumption. I think this project is very attractive and would be very much beneficial for the country,” he added.

In 2010 September, then President Mahinda Rajapaksa during his meeting with the Head of State of Qatar Kalifa Altani, discussed the possibility of commencing a LNG power project in Sri Lanka, in a bid to make the island nation an energy hub. Furthermore, the head of state of Qatar agreed to extend his fullest support to commence an LNG project of Qatar in the island.

However, Sri Lanka, though aspiring to be a mega global energy hub is yet to harness the vast potential natural gas-related industries have to offer.

6 Comments for “LNG Limbo”

  1. Trevor Jayetileke

    Everything in Power and Energy is in Limbo.
    The PRDS of Sri Lanka though a Sri Lankan Government Body supposed to regulate the search of oil and gas is a ‘One Man Show’ by a MR Confidante who was as powerful as the President before he was found out to be involved in a alleged Tsunami Fraud signing massive cheques to Ghost companies as COO of Rada and handpicked by MR for the job like he was his adviser for oil exploration. Even today he is still the DG of the PRDS working incognito. He has bluffed MR, then Champika and now doing the same to Weerakkody. This man is chasing ‘Red Herrings’ and runs his fiefdom in the “Akasa Building” like a NGO with a invisible hand directing our oil exploration program. But does anyone care or know what goes on. Today Sri Lanka has been reduced to a Banana Republic.

  2. Eng.M.V.R.Perera

    What is the cost per KWh from this 500 Mw plant it will be more than 3 times the cost per kWh from a similar coal plant

    • Real cost of a Coal plant is more than 4 times its fuel costs when the externalised costs are included. “Accounting for the damages conservatively doubles or triples the price of electricity from coal per kilowatt hour generated, making wind, solar, and other forms of non-fossil fuel generation…economically competitive.” – http://www.motherjones.com/environment/2015/08/coals-cost-climate-change
      Social Cost of CO2, 2015-2050 a (in 2014 Dollars per metric ton CO2)
      Source: Technical Support Document (PDF, 21 pp, 1 MB): Technical Update of the Social Cost of Carbon for Regulatory Impact Analysis Under Executive Order 12866 (May 2013, Revised July 2015)
      __________________Discount Rate and Statistics _____________________
      Year ____5% Average__ 3% Average__ 2.5% Average ____3% 95th percentile
      2015___ $12 __________$40__________ $62____________ $120

      These figure keep increasing year by year and are in in 2007 dollars per metric ton of CO 2 — http://www3.epa.gov/climatechange/EPAactivities/economics/scc.html

  3. de silva

    IT IS INDEED DEPRESSING TO HEAR THESE WHEN SINGAPORE IS GEARING ITSELF TO HAVE LNG TERMINALS SINCE MANY SHIPS IN FUTRE WILL GO GREEN AND WILL B USING LNG AS ITS FUEL. IT IS A PITY OUR POLITICIANS DO NOT FORESEE THESE CHANGES THAT ARE TAKING PLACE AROUND THE WORLD. I AM SURE THE PRIME MINISTER / HARSHA DE SILVA AND ERAN WIKREMARATNE MUST B FULL AWARE OF THE POTENTIL THIS PROJECT HAS,.

    THIS COUNTRY WILL NEVER B ABLE TO UPLIFT THE POOR FROM THEIR EXISTING STATUS AT THIS RATE.
    TIME FOR THE POLITICIANS TO THINK AFRESH.

  4. Patriot

    Under the MR Government we saw the rapid progress in infrastructure development, the benefits of many , Sri Lanka is already enjoying. The new regime under MS and RW have been merely making noises and allegations against the MR regime for so called corrupt deals, but have not done anything in the past 9 months, other than bringing to a halt many major development projects. This is a sign of incompetence and a lack of vision being covered up by throwing mud at the previous regime. Its time to move on with development that was shattered for over 3 decades of terrorism.

  5. CEB Generation planning is for more and more Coal Power plants and are against more environmentally friendly technologies for unknown reasons. They do not seem to follow the recent Ministry policy to go for more Non Conventional Renewable like the cheaper Wind and Solar with the fear of their variability and intermittency. Many countries are going for higher percentage of these distributed power plants without much stability problem by planning properly going for SMART Grid and Inter connections with other utilities. Sri Lanka India undersea cable project is also getting delayed and with the delay of the Sambur Coal plant with the much environmental objections will lead to again going for high cost liquid fuel powered Private Power as what happened earlier. This is now inevitable situation. Having a good mix of different fuels for power generation and availability of LNG for other uses must be taken seriously by GOSL. CEB alone must not be allowed to take these decisions. A good National policy is essential.

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