- No decision yet on Petronet’s short-term offer
- Delay could cost $ 304 m
The State-run Ceylon Electricity Board (CEB) has awarded the long-delayed Liquefied Natural Gas (LNG) tender to a Chinese company, reviving a project that has remained in limbo for years due to political and administrative delays, as confirmed by CEB Chairman and Ministry of Energy Secretary Prof. Udayanga Hemapala.
The highly contentious tender – first floated in February 2021 and closed in June 2021 – involves the development of a Floating Storage Regasification Unit (FSRU) and LNG pipeline offshore at Kerawalapitiya under a Build, Own, Operate, and Transfer (BOOT) model, along with an associated mooring system.
The project was suspended by the former administration pending a review by the Gas Utilisation Master Plan Committee.
According to senior CEB sources, the utility is now in the final stages of concluding the tender process.
Despite previous concerns over transparency and the project’s alignment with Sri Lanka’s long-term energy strategy, insiders indicate that the Chinese company is poised to secure the contract.
When contacted, CEB Chairman and Ministry of Energy Secretary Prof. Udayanga Hemapala stated that all procedural steps were duly followed before finalising the award.
Meanwhile, no significant progress has been made on a competing proposal by India’s Petronet LNG Ltd., initially presented as a short-term solution for the country’s energy needs.
Prof. Hemapala said that the Petronet proposal remained under evaluation and was subject to a fresh assessment under the current administration.
He said no decision had been taken yet to remove the project.
The proposal – a government-to-government arrangement – envisages LNG procurement and infrastructure development through Lakdhanavi Ltd., a subsidiary of LTL Transformers Ltd., with revisions to the Power Purchase Agreement (PPA) anticipated.
The tender award comes as Sri Lanka accelerates efforts to transition from expensive, polluting furnace oil and diesel-fired power plants to LNG, which is seen as a cleaner and more cost-efficient alternative.
A Cabinet memorandum in July 2023 emphasised the need for a thorough reanalysis of the country’s LNG procurement process, noting deficiencies in demand projections and sector coordination.
Sri Lanka’s LNG sector has been mired in controversy, particularly following a stalled 2021 agreement with New Fortress Energy to develop an offshore LNG terminal. That deal, too, was suspended following a Government change in 2022.
According to the CEB, average LNG prices from 2020-2023 were $ 9.6/MMBtu (Brent Index) and $ 8.2/MMBtu (Henry Hub-linked). The Long-Term Generation Expansion Plan (LTGEP) uses a projected LNG price of $ 11.2/MMBtu. Delaying LNG availability by three years could increase costs by about $ 304 million, highlighting the importance of timely implementation for Sri Lanka’s energy transition.